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What is an industry leader?

April 26, 2012 by Dale Furtwengler — President, Furtwengler & Associates, P.C.

"Industry leader" is one of the financial press' favorite phrases, yet how often do they define the term? What makes one company, above all others, the industry leader? More importantly, why should you care?

For decades, General Motors was, and is, the largest auto manufacturer in the world. Does that make them the industry leader? Not according to my definition.

To me the industry leader is the one that, regardless of size:

• Offers a powerful brand image
• Does so profitably
• Leads the way in price increases

This insight was triggered by a recent USA Today article, Toyota raise prices on many models by Chris Woodyard. Toyota is taking the lead in raising prices at a time when most auto makers are merely reducing the discounts they once offered. That's leadership!

Toyota's ability to take the lead in raising prices comes, not just from an improved economy, but from a powerful brand image. Other than when they stubbed their toes on the stuck accelerator issue a few of years ago, Toyota has developed a reputation for quality that is unsurpassed in the industry. Indeed, if they identified a design flaw, they'd remedy it at no cost to the buyer even if the car was out of warranty.

One of the keys to Toyota's success in developing its brand is that improvements to its cars are functional and user friendly. The changes aren't so dramatic that the owner has to relearn how to use the product. This combination of functionality and ease of use allows Toyota to lead the way in pricing.

This strong brand image and price leadership have, other than in 2009, allowed Toyota to enjoy profitability throughout the worst economy in seven decades. The 2009 losses can be attributed to the stuck accelerator repairs and the temporary loss in customer confidence. The fact that the Toyota brand was able to rebound so quickly from that faux pas is a testament to the strength of the brand.

The morale of this story is that you don't have to be the biggest dog in the pound to be the leader. Leadership comes from your ability to serve your customers better than anyone else in your industry in ways that have value to them.

About Dale Furtwengler

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