The 4 Types of Businesses

cannot remember where I got this because it was so long ago. It could have been a book. What it said was that there are four types of businesses with four different strategies. So, if you are an entrepreneur, you would have to select which business and strategy fits your venture.

1. The market leader - This is the biggest player in a market category. The strategy is to leverage on economies of scale and the main objective is to protect market share. Nowadays, you could say it is also to leverage on network effects and scale before anyone else does. Think Windows, WhatsApp and Airbnb.

2. The next big players - These are the main competitors to the market leader. The strategy is to leverage on differentiation that would allow them to charge a premium, because they generally wouldn't be able to beat the market leader on price. Think MacOS and Telegram. Don't think there's a real competitor to Airbnb yet.

3. The niche players - These are businesses that target a certain niche in the market which the main players would ignore because it's too small or specialized for them.

4. The fly-by-nights - These are businesses that are not meant to grow or compete. They take advantage that there are no competitors yet in a particular market, and they fill the gap for as long as they can. Once competition arrives, they close down and move on to something else.