A Cautionary Tale About Market Share

on August 30, 2012
TI Travelmate ad
via spaziodigitale.net

My colleague John Kirk’s series of posts about Android, iPhone, and the importance–or lack thereof–of market share brought back memories of some fights over share in the PC business. The moral  of all the stories is that companies that went after share at the expense of profit were either forced to reverse course quickly or get out of the business.

My favorite example was Texas Instruments, which decided to make a big splash in the laptop business in the mid-1990s. TI was making a nice line of TravelMate laptops (if the name sounds familiar, it’s because it lives on as an Acer sub-brand) but was lost in what was then a crowd of PC makers. It decided to cut prices sharply. This set off a 1996 price war in the industry, but had the desired effect of greatly boosting TI’s market share. It rocketed out of the pack to, I believe, a #3 rank in the market. Unfortunately, it lost TI a couple of billion dollars in the process and within less than a year, the company sold its PC assets to up-and-coming Acer and exited the business.

This was an extreme case, but HP, Dell, and Acer have all played the market share game. Each achieved dominance at the expense of profits. And none has fully recovered from the experience.

And that is why I believe apple’s profits-first strategy is a much better forumla for long-term success