Market Leaders Face New Challenges in Retaining and Strengthening Their Leadership Role

What is a Market Leader?

The conventional definition of a market leader is a company that is considered the low-cost producer within a given market segment or market space. Market leaders are the highest volume producer in their market space. As a result of being the low-cost producer, they also achieve the highest margins. These distinctions carry with them leverage against their competitors. Market leaders also represent the highest share-of-market.

Market leaders normally have strong, competitive product lines. This includes some leading-edge technologies that they sell into the market where they play a leading role. Maintaining a technology advantage further strengthens their strong market position.

Market leaders place a high level of importance on enhancing their brand identity and maintaining a strong, positive corporate image. This is of critical importance when contemplating entry into new markets, targeting expansion growth into alternative geographies, or plotting diversification outside of the company’s present core markets. In general, a strong brand image provides leverage over competitors including companies challenging for a market leadership position.

Protecting and reinforcing corporate image and brand strength has always been a necessary part of a successful market strategy. Market leaders are compelled to continually update and strengthen the company message to keep ahead of their competitors. Leaders also need to ensure they deliver their message to all elements of the value chain.

In the past, corporate efforts directed at image enhancement and brand reinforcement were more as a promotional activity and a strategic obligation. This included the importance of delivering positive messages to shareholders.

Sustaining the Position Of a Global Leader In Today’s Coatings Market

The process of building and reinforcing corporate image has changed over the last five to 10 years. Corporations, especially those who are currently considered global market leaders (or those that aspire to become one) are under pressure to step up with actions to address the high-profile strategic issues. In this regard, there now needs to be a direct connection between the image message and the action being taken by the corporation.

Table 1 provides a list of the strategic game changing issues that are affecting the global coatings market today.

Whether the company is a formulator, a resin supplier, an additive supplier or one providing equipment or a service to the coatings market, the way in which global organizations address such issues now plays a key role in defining who are the market leaders in their field.

The importance of each of these issues (Table 1) has risen to the top of the list in items that need to be addressed when developing future corporate growth strategies. Global companies now strive to elevate their competitive position beyond the measures that had traditionally defined a market leader. Market leaders today don’t just want to be considered by their customers and actual end-users or OEMs as having the largest share-of-market or being the lowest cost producer. They understand that customers now want to align themselves with companies that are pro-active with programs directed at sustainability and the environment. Companies know that to be the market leader they must be engaged and have active programs in place to address these issues.

Major global manufacturers and OEMs who use coatings are now setting goals for their coating suppliers with regard to sustainability and the need to incorporate more bio-based content into their products. These goals are linked to the manufacturers commitment to their customers to comply to the net-zero CO2 emissions targets set for industry in the Paris Accords. Failure for a supplier to show progress against such targets opens the door for competitors.

A corporate focus on sustainability also means addressing waste disposal and landfill issues. This includes the need for suppliers to use more biodegradable materials in their products and packaging. These are worldwide issues that now confront global coatings manufacturers and the raw material suppliers including resin producers, and the various additives used in these formulations. Market leaders are compelled to established and execute valid programs in this regard.

COVID 19 Adds to The Challenge of Market Leadership

The global pandemic has made the task of establishing and implementing sustainability initiatives, including actions intended to address recycling, reuse and waste disposal issues, much more difficult. Supply chain problems have been and continue to be pervasive. Demand and demand shifts for many key raw materials have limited the availability of raw materials that previous were relatively easy to obtain. The resulting disruption of the established supply and demand dynamic has caused prices to escalate to levels that were not previously predictable.

A consequence of the above has been the significant amount of added attention required by suppliers in our industry to meet the needs of their customers. Attempting to accomplish this objective in as timely a way as possible - albeit at a high to much higher price - has been more than a distraction. It has become a full-time job by itself.

One challenge for market leaders, under these circumstances, continues to be the need to address short-term needs required to keep customers supplied with product while trying do the other things important to growing the existing business.

A second challenge (under the circumstances of supply-chain shortages) has been the need for companies to maintain their commitments on initiatives directed toward sustainability that have been put into motion. The difficulty is to accomplish these objectives while trying to survive, protect existing business with current customers and implement growth strategies necessary to retain a leadership role in the market.

No question, there is no going back to the time when issues of corporate image such as sustainability were often dealt with through more words than actions. At the same time, the traditional measures that define a market leader continue to be important and relevant. These include having the largest share-of-market and being the low-cost producers in the market. The market leader is still the company with the greatest leverage over its competitors.

What has changed? The traditional measures that define a global market leader have been up-staged (not replaced) by the importance of corporate image based on the company’s efforts to address sustainability and environmental issues. Leading companies now have active programs and long-term commitments to address the needs of the market and the major manufacturers in these market spaces.

Impinging on the above shift in priorities and the positive impacts they represent has been the COVID pandemic and the situation it has created with respect to supply chain disruptions. The sometimes overwhelming complications that have results has complicated and interfered with the ability of companies to effectively address these issues while trying to survive and meet the expectations of their customers.