Trading Case - What is Leadership?

In human relations leadership can be understood as the act of being followed by others. The reason which can lead us into such situation can differ, since a leader can be chosen by its followers or be imposed by someone in higher position, therefore it is a matter of acceptance and respect.

When regarding competition between companies the same logic can be perceived, however the rules change once the ambient, people involved and interests are different. A company which is considered the leader of its market normally dictates the rules and the ways the business is done and held. Instead of giving orders as people do, companies create the new market guidelines.

In trading this process can manifest itself in many ways. If the market leader develop new logistic route for his imported merchandise, automatically it makes him more competitive. It can change the shipping time, price, security or even the amount carried. This action results in the competitor’s need to develop new strategies and ideas to stand against the new competitive rules set up by the Leader.

When I was working in Brazil as strategic planning director for a group of 38 companies, I faced many challenges related to competitiveness, but one in specific detains my attention “The Retail Chain which goes online”. The company which I mention is the leader in its sector; it holds the exclusiveness for the importation of many brands, they also have all the logistics to distribute these products around the Brazilian territory, therefore they dictate the rules (price and availability) of these products.

Their stores were not available over all the territory, as a result a competitor developed an online store in order to sell and distribute its products in areas which the leader did not cover. It was a successful plan, the smaller company managed to reach and develop itself in a new way becoming leader of the online sector plus in the territories not covered by the leader. We can understand and see the smart work and innovation transforming a smaller competitor in the market leader.

Anyway, this case does not end here. The former leader decided to take counter measures, we must remember it is powerful, dominates the logistics, importation, exclusiveness and prices. An online store was developed and all these support was given, fact which made them more competitive and one year later leaders of the online segment.

The size of a company can help it gain competitiveness in order to reach the market’s leadership, however innovation (Research and Development) and smart working (doing it fast and correctly) are the real factors behind it. Being big can give you power to easily develop new methods and technologies, however it does not mean an enormous company will be the most smart or even have the best ideas.