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Über dieses Buch

In our increasingly digital, mobile, and global world, the existing theories of business and economics have lost much of their appeal with the phenomenal rise of Chindia, the reality of Brexit, the turmoil caused by the Covid-19 pandemic, and the seismic shifting of the global center of gravity from west to east. In the area of innovation, the traditional thinking that a developed country, often the US, will come up with the next major innovation, launch at home first, and then take it to other markets does not ring true anymore. Similarly, the world where conglomerates go bargain-hunting for acquisitions in emerging markets has been turned upside-down.

This book reveals and illustrates the Global Rule of Three phenomenon, which stipulates that in competitive markets only three companies (which the authors call "generalists") can dominate the market. All other players in the market are specialists. Further, whereas the financial performance of generalists improves as market share increases, specialist companies see a decrease in financial performance as their market share increases, as the latter are margin-driven companies. This theory powerfully captures the evolution of global markets and what executives must do to succeed. It is based on empirical analyses of hundreds of markets and industries in the US and globally. Competitive markets evolve in a predictable fashion across industries and geographies, where every industry goes through a similar lifecycle from beginning to end (or revitalization). From local to regional to national markets, the last stop in the evolution of markets is going global. The pattern is so consistent that it represents a distinct and natural market structure at every level. The authors offer strategies that generalists and specialist should follow to stay competitive as well as twelve expansion strategies for global companies from emerging markets.

This book chronicles this global evolution and provides impactful managerial implications for executives and students of marketing and corporate strategy alike.

Inhaltsverzeichnis

Frontmatter

1. What Is the Rule of Three?

Abstract
This chapter provides an overview of the Rule of Three. Competitive markets grow, consolidate, and mature, ultimately leading to the emergence of three full-line generalist firms. These volume-driven players must have a minimum efficient scale of at least 10% market share and are accompanied by a number of smaller product or market specialists. The financial performance of full-line generalists gradually improves with greater market share, while the performance of specialists drops off rapidly as their market share increases. In between the generalists and specialists are the companies who exhibit the worst financial performance, stuck in “the ditch.” The best strategy is to stay far away from the ditch. The Rule of Three applies to all stages of a market’s geographical evolution: local, regional, national, and ultimately global. The Rule of Three structure generates optimal operational efficiency in competitive markets and positive impact on all stakeholders. It is an empirical reality that must be factored into the strategy of businesses of all sizes.
Jagdish Sheth, Can Uslay, Raj Sisodia

2. Strategies for Generalists, Specialists, and Ditch Dwellers

Abstract
This chapter examines the different categories of strategic firm groups that come about during the convergence to the Rule of Three and describes the most optimal strategies for each group. Number 1 generalists have the option to be fast followers or focus on growing the entire market. The #2 generalist has the choice to co-exist or challenge the leader; the best strategy depends on the market share of both. Number 3 businesses are often the most innovative and they should try to dominate a market segment to insulate themselves from being pushed out into “the ditch” by #1 and #2. For niche players, common strategies include becoming supernichers or selling to generalists. Optimal growth is achieved by creating new specialists without oversaturating the markets. For companies in the ditch, downsizing and merging through consolidators are the most viable strategies. There is concrete empirical evidence that being stuck in the ditch is so common that it can be characterized as a law-like empirical generalization.
Jagdish Sheth, Can Uslay, Raj Sisodia

3. How Industries Evolve, Mature, and Revitalize

Abstract
Industries go through a similar process of evolution in pursuit of growth and efficiency. This chapter highlights that process and discusses each stage of their life cycle: start up, growth, maturity, and aging. The start-up phase is marked by significant growth and a lack of organization. Those who can create efficiency survive. In the growth phase, the challenge is to gain market share while becoming a full-line generalist. This is done by adopting one of the following strategies: market penetration, market expansion, complementary diversification, or product expansion. The maturity phase is when revitalization and the adoption of new technologies must occur for survival. Efficiency through scale typically results from the following scenarios: government mandates, regulated monopoly, shakeouts and mergers, and shared standards/costs. After an industry achieves scale efficiency and scope capabilities, it must evolve to revitalize to avoid death. The key drivers of market revitalization are substitute technologies, changing demographics, changing policy and regulation, and emerging markets. Emergence of middle-class markets presents significant opportunities for market revitalization in the twenty-first century.
Jagdish Sheth, Can Uslay, Raj Sisodia

4. Ten Ways to Innovate and Revitalize Industries

Abstract
This chapter addresses vital questions such as the following: How are industries born? How do they grow, plateau, and get revitalized? How do they get creatively destroyed? Disruptive technologies or business models typically emerge from outside of the industry and revolutionize it. Industries exist in a dynamic balance between monopolistic competition and oligopoly. Industry evolution and inertia are primarily driven by two factors that are often at odds with each other: the need for efficiency and growth. Contrary to conventional wisdom, industries are born due to many reasons besides new technological breakthroughs. Most new industries are born by transformation from manual to automation; outsourcing; reducing friction in commerce and consumption; tapping into unmet needs; converting wants into needs; moving from unbranded to branded products and services; leveraging platforms and infrastructure; government policy; inventing here, marketing there; and finally eureka! Access to capital is the real competitive advantage of entrepreneurs. Shakeouts and mergers occur more due to capital shortage than differentiation and competition. De jure as well as de facto standards are equally important in industry organization. Corporate strategy is becoming more dynamic and volatile. The breakup value is often greater than the original corporation value.
Jagdish Sheth, Can Uslay, Raj Sisodia

5. Evolving to the Global Rule of Three

Abstract
The chapter offers insights into the transition of the Rule of Three from local to national, regional, continental, and global, which is illustrated with numerous industry examples. Competitive markets evolve in a predictable fashion across industries and they go through similar life cycles. Many generalists that are dominant in their countries or regions are unable to have the same success when the market globalizes. There is generally one global survivor from each of the three major economic zones. For a company to survive and succeed as a global, full-line generalist, they must be prominent in at least two of the three legs of the global triad. If a country has a large stake in an industry, it may be home to two or even all three full-line players. Niche companies/specialists in a globalizing market have four options: (a) they can expand internationally and become a global niche player, (b) they can remain domestic as a superniche company, (c) they can launch new specialist businesses, or (d) they can let themselves be acquired at a premium. Many specialists will experience at least two of these options, if not more, in the coming decades.
Jagdish Sheth, Can Uslay, Raj Sisodia

6. The New Triad Power: Impact on Global Markets, Resources, and Politics

Abstract
Each century has been marked by the successes of different regions and cultures. The trade triad that was prominent in the twentieth and early twenty-first century consisted of Western Europe, North America, and Japan. However, a new triad has been emerging consisting of America, China, and India, and this group will reshape world policy in the twenty-first century. Some of the factors driving this shift in the triad include rapidly aging populations in affluent nations, economic reforms in China and India, and the rise of a new middle class. Unlike the harmony orchestrated by the U.S. in the old triad, the new triad power comes with possible problems, especially between China and the U.S. Their differences will inevitably create tensions, and India will increasingly become a more strategic partner to both. Demand for the world’s resources will create strange bedfellows among nations and resource-driven global expansion for enterprises and nations. Technology breakthroughs will tend to stem from resource conservation and scarcity, shifting the way business around the world is run in the twenty-first century.
Jagdish Sheth, Can Uslay, Raj Sisodia

7. Global Expansion Strategies for Multinationals from Emerging Markets

Abstract
This chapter examines how emerging-market multinational companies (EMNCs) should go about successfully operating in other emerging and developed markets so they, too, can become global players. The infrastructure, regulatory, socio-economic, socio-political, technological, and cultural systems in emerging markets are drastically different. The authors assert that their business and marketing strategies have been and should be different from those of the traditional conglomerates of the world in order to succeed. Differential advantages of EMNCs include flanking advantage, diaspora advantage, customer advantage, cost advantage, home turf advantage, and the geopolitical advantage. Resource scarcity will drive major technology breakthroughs, such as cloning and nanotechnologies, where key drivers of innovation will be affordability and accessibility of products, technologies, and services. EMNC dominance will be most apparent in sectors where operand resources are dominant. Over time, EMNCs will challenge global leadership sectors where both operand and operant resources are critical. In these sectors, we may see global leadership shared between MNCs and EMNCs. The last frontier will be sectors where primarily operant resources are sufficient.
Jagdish Sheth, Can Uslay, Raj Sisodia

8. Epilogue: What Does the Global Future Hold?

Abstract
The authors provide a retrospective review of macro-level trends and identify the preeminence of entrepreneurial drive for economic growth in the twenty-first century. Entrepreneurship is more universal, more inclusive, more egalitarian, more innovative, and more future positive than capitalism. It is the great equalizer that gives back and helps us realize human potential. In many ways, it is a nation’s true competitive advantage. The authors reiterate the underlying principles and summarize the key takeaways from the Global Rule of Three. Entertainment, trucking, retail, automotive, insurance, and financial services will all see more turbulence over the next decade than they have seen over the last 30 or in some cases even 100 years. However, mega-trends prevail no matter the turbulence, and governing dynamics of such as the Five Forces and the Global Rule of Three persist and overcome the test of time. In the aggregate analysis, the growth story of the first third of the twenty-first century will belong to China, second third to India, and the final stretch will belong to Africa.
Jagdish Sheth, Can Uslay, Raj Sisodia

Backmatter

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