What is the rule of 3 4?

A stable competitive market never has more than three significant competitors, the largest of which has no more than four times the market share of the smallest.

bcg.com - The Rule of Three and Four - Boston Consulting Group

What's the hardest sport to master?

Degree of Difficulty: Sport Rankings SPORT END RANK Boxing 8.63 1 Ice Hockey 7.25 2 Football 5.38 3 33 more rows

Last updated Oct 3, 2018

How much is a 500000 TikTok?

How much does 500k views on TikTok pay? You will get $15 for 500,000 views. TikTok pays its content creators around $0.02 – $0.04 per every 1,000...

Last updated May 7, 2020

Promotion

The Rule of Three and Four is a hypothesis. It is not subject to rigorous proof. It does seem to match well observable facts in fields as diverse as steam turbines, automobiles, baby food, soft drinks and airplanes. If even approximately true, the implications are important. The underlying logic is straightforward. Cost is a function of market share as a result of the experience curve effect. If two competitors have nearly equal shares, the one who increases relative share gains both volume and cost differential. The potential gain is high compared to the cost. For the leader, the opportunity diminishes as the share difference widens. A price reduction costs more and the potential gain is less. The 2 to 1 limit is approximate, but it seems to fit. Yet when any two competitors actively compete, the most probable casualty is likely to be the weakest competitor in the arena. That, logically and typically, is the low share competitor. The limiting share ratio of 4 to 1 is also approximate but seems to fit. If it is exceeded, then the probable cost differential produces very large profits for the leader at breakeven prices for the low share competitor. That differential, predicted by the experience curve, is enough to discourage further reinvestment and efforts to compete by the low share competitor unless the leader is willing to lose share by holding a price umbrella.

There are two exceptions to this result:

A low share competitor can achieve a leadership position in a given market sector and dominate it cost-wise if there is enough shared experience between that sector and the rest of the market, and he is a leader in the rest of the market, or An otherwise prosperous company is willing for some reason to continually add more investment to a marginal minor product. This can be caused by accounting averaging, full line policy or mismanagement. Whatever the reason, it appears that the Rule of Three and Four is a good prediction of the results of effective competition.

There are strategy implications:

If there are large numbers of competitors, a shakeout is nearly inevitable in the absence of some external constraint or control on competition. All competitors who are to survive will have to grow faster than the market in order to even maintain their relative market shares with fewer competitors. The eventual losers will have increasingly large negative cash flows if they try to grow at all.

How many followers on Instagram makes you famous?

Although the minimum threshold for fame on Instagram is 30k followers, you can't do no harm amassing close to or more than 100k followers. In fact,...

Last updated Aug 26, 2020

How many rupees is 1 billion?

1 billion in rupees is 10,000 lakhs. 1 billion is a natural number and is given by 1,000,000,000.

Last updated Oct 30, 2020

Promotion

All except the two largest share competitors will be either losers and eventually eliminated or be marginal cash traps reporting profits periodically and reinvesting forever. Anything less than 30 percent of the relevant market or at least half the share of the leader is a high risk position if maintained. The quicker any investment is cashed out or a market position second only to the leader gained, then the lower the risk and the higher the probable return on investment. Definition of the relevant market and its boundary barriers becomes a major strategy evaluation. Knowledge and familiarity with the investment policies and market share attitudes of the market leader are very important since his policies control the rate of the inevitable shakeout. Shifts in market share at equivalent prices for equivalent products depend upon the relative willingness of each competitor to invest at rates higher than the sum of both physical market growth and the inflation rate. Anyone who is not willing to do so loses share. If everyone is willing to do so, then prices and margins will be forced down by overcapacity until someone begins to stop investing.

There are tactical implications which are equally important:

If the low cost leader holds the price too high, the shakeout will be postponed, but he will lose market share until he is no longer the leader.

The faster the industry growth, the faster the shakeout occurs.

Near equality in share of the two market leaders tends to produce a shakeout of everyone else unless they jointly try to maintain the price level and lose share together. The price/experience curve is an excellent indicator of whether the shakeout has started. If the price curve slope is 90 percent or flatter, the leader is probably losing share and still holding up the price. If the curve has a sharp break from 90 percent or above to 80 percent or less, then the shakeout will continue until the Rule of Three and Four is satisfied. The market leader controls the initiative. If he prices to hold share, there is no way to displace him unless he runs out of the money required to maintain his capacity share. However, many market leaders unwittingly sell off market share to maintain short term operating profit. A challenger who expects to displace an entrenched leader must do it indirectly by capturing independent sectors, or be prepared to invest far more than the leader will need to invest to defend himself.

Which country uses Instagram the most?

India Which country has the most Instagram users? According to the latest Instagram statistics, India tops the list ranking Instagram users by...

Last updated Feb 15, 2021

What's the hardest sport to master?

Degree of Difficulty: Sport Rankings SPORT END RANK Boxing 8.63 1 Ice Hockey 7.25 2 Football 5.38 3 33 more rows

Last updated Oct 3, 2018

Promotion

There are public policy implications:

The lowest possible price will occur if there is only one competitor, provided that monopoly achieves full cost potential even without competition and passes it on to the customer. The next lowest potential price to the customer is with two competitors, one of which has one third and the other two thirds of the market. Then cost and price would probably be about 5 percent higher than the monopoly would require. The most probable, and perhaps the optimal relationship, would exist when there are three competitors, and the largest has no more than 60 percent of the market and the smallest no less than 15 percent. A rigorous application of the Rule of Three and Four would require identification of discrete homogeneous market sectors in which all competitors are congruent in their competition. More typically, competitors' areas of competition overlap but are not identical. The barriers between sectors are sometimes surmountable, particularly if there are joint cost elements with scale effects. Yet it is a commonly observable fact that most companies have only two or three significant competitors on any product which is producing a net positive cash flow. Other competitors are unimportant factors. The Rule of Three and Four is not easy to apply. It depends on an accurate definition of relevant market. It requires many years to reach equilibrium unless the leader chooses to hold his share during the high growth phase of product life. However, the rule appears to be inexorable. If the Rule of Three and Four is inexorable, then common sense says: if you cannot be a leader in a product market sector, cash out as soon as practical. Take your writeoff. Take your tax loss. Take your cash value. Reinvest in products and markets where you can be a successful leader. Concentrate.

bcg.com - The Rule of Three and Four - Boston Consulting Group

How do I start social media marketing?

10 Steps to Getting Started in Social Media Marketing Determine your goals. What do you want to get out of your social Web participation? ......

Last updated Oct 21, 2018

What does 1K mean?

1 thousand What does '1K' or '1M' mean? In the digital world, 1K is used to refer to 1 thousand, and 1M is used to refer to 10 lakh. so when it...

Last updated Dec 23, 2022

Promotion

What job pays you the most without a degree?

Note: We used the Bureau of Labor Statistics' median salary data from 2019 to compile this list and infographic. Transportation, Storage, and...

Last updated Aug 13, 2021

Promotion

How many views do you get per 1000 views?

On average, YouTube monetization for 1000 views (also known as CPM – Cost Per Mille) ranges from 0.5 to 6 USD based on the location of viewers and...

Last updated Nov 23, 2018