January 20, 2006

Does it pay to be number one?

Not really, says Brian Hindo in “Tough Times for Leaders of the Pack,” an article he wrote in the Jan 30th Business Week. He cites research by consultants at Marakon Associates that shows:

… in recent years scale hasn’t delivered the advantage you might expect. In analyzing 3,260 public companies, Marakon’s Brian Burwell and Jeremy Sicklick discovered that between 1999 and 2004, the median total shareholder return was 1.8% for market leaders vs. 9.5% for non-leaders.

Wow - that's quite a performance gap! This was due in part, Hindo says, to an increasingly segmented consumer marketplace where companies that try to appeal to the masses have been having a harder time finding them. The customers are still there, of course. They just like to be treated as individuals, not as part of some big lump.


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