King of the Hill (also known as "King of the Mountain" or "King of the Castle"), is a game, the object of which is to stay on top of a large hill or pile (or any other designated area) as the "King of the Hill". Other players attempt to knock the current King off of the pile and take their place, thus becoming the new King of the Hill. (Source: Wikipedia).
While this is just a game, the situation holds true in case of the modern business scenario too. The company which wants to be the king of the mountain needs to follow well planned strategies. To be the king of the mountain called business, one needs to convince the customers, suppliers and even the shareholders that one has all the requisite qualities to be the king. The players in this game need to follow certain rules. The one who follows these rules emerges the king.
A few of those rules are:
Rule 1 - Guard the summit.
The most important rule is to protect the company against every possible avenue of assault. The company can be attacked on the products front or the final consumer (target group) front or distribution front. The company needs to guard itself against all its competitors, be it small or big. As a market leader, the company cannot afford to be complacent and relax.
In the late 1990s, Colgate was the King of the oral care mountain. Hindustan UniLever (HUL) replaced it by biting off a 37 % market share from Colgate. HUL used the novelty element in gel toothpaste to make steady inroads into Colgate's dominance in the oral care market. By 1999-end, Close Up, a HUL product had garnered an 18% share of the market.
ITC with a slew of competitively priced products gave a tough fight to Britannia. Britannia's market share dropped from 35.8% in 2004-05 to 30.5% in May 2006 (volumes). Parle's shares also dropped from 42.2 to 38.4% in the same period. ITC's Sunfeast was a big gainer with its share increasing from 2.7 to 6.7%.
Rule 2 - Fight from an uphill position- use the first mover advantage.
The army, just like the company, has a first mover advantage if it is positioned atop a hill. However, deployment of resources is necessary in this case. To maintain the leadership position, companies need to constantly innovate their products. They need to target new set of consumers and expand their distribution. Branding plays a very important role.
Eg: GSK Consumers is the market leader in the health beverage space. Horlicks' market share of the Rs 23 bn milk beverages market is above 50% (source: The Nielsen Company). Rivals know beating Horlicks in the market place is a tough act. Nestlé has stopped making Milo and new entrant Dabur India has decided to stay clear of Horlicks and pitch its 'Chyawan Junior' against GSK Consumer Healthcare's other beverage brand, Boost.
Rule 3 - Use superior weapons.
Having superior weapons (resources) always puts the player at an advantage. The products, marketing strategies, branding power, distribution network are the weapons of the companies. Also, it is very important to use the resources efficiently. The company, in order to maintain leadership needs to have superior quality products. If not technically superior, the company should be able to meet the demands of the target group. In terms of the marketing strategies, the 4 P's should be conveyed properly. Targeting the right group at right place and with right emotions is the need of the day.
Eg: HUL used sachets to target rural areas. Marico leveraged its Parachute brand to other products like Parachute Advansed Night Repair Crème, men's gel etc.
Rule 4 - Leverage your allies.
A company cannot survive without the help of suppliers, employees and distributors among others. Hence, it is necessary for the companies to maintain good relations as it is easier to remain at the top if your supporter wants you to.
Eg: ITC has a huge distribution network for its tobacco business. It leveraged this network for its Bingo brand.
Rule 5 - Move secretly and deceptively.
The company should keep its plans confidential. A strong market leader knows more about the competitor than the competitor does about himself. There should be an element of surprise involved.
Eg: HUL entered the oral care market with the gel category which gave a tough time to Colgate. Every marketer has then signed Colgate off saying that it cannot fight with HUL. But Colgate struck back with the launch of Colgate fresh energy gel and the famous campaign “TALK TO ME" that stole the gel category from HUL. Close Up never recovered from that blow.
Rule 6 - Don't let the enemy gain momentum.
One should never let the competitor gain an advantage. This was clearly evident during the HUL – P& G detergent war. By letting the competitor gain momentum, HUL faced trouble.
Rule 7- Don't let the enemy see you sweat.
This arises when the company is in critical stages and nearing defeat. It is advisable to send messages that the company still doing well which may discourage the competitors.
Eg: When Colgate lost the market share to HUL, it fought back with launch of Colgate fresh energy gel and now is a market leader.
As an investor:
Thus, as an investor, one must select companies which follow the above set of rules. One should select companies which dominate the segment they operate in and manage to adapt to the changing environment Investing in market leaders is betting on the long-term that the company would have a dominant advantage to flourish for years to come. However, one must always keep a track of these stocks as the market leaders may get complacent and can fall from glory. Further, these stocks are also not insured against price volatility. Hence, valuations too play an important role.(The rules are taken from PYRAMID White Paper)