5. Microsoft vs. Nintendo
The game console business has had several changes in market share since the launch of the most successful product in the industry’s history in 2000–the PlayStation 2–which would eventually sell 150 million units. The most recent generation of consoles includes the Microsoft Xbox 360, the PS3, and Nintendo Wii. Sony was the favorite to dominate this new wave of machines because of its huge lead with the PS2. Microsoft was willing to offer more features in the Xbox and kept prices competitive. Nintendo entered the market with the Wii, which was designed for casual game players, which the PS3 and 360 were not. The Nintendo plan worked. The Wii had a 23% market share in 2006. Microsoft’s was 65%. By 2009, the Wii share was 50% and Microsoft’s was 23%. The industry is in the midst of another colossal change. Consumers have begun to play more games online and on smartphones. The best years of the large fixed-position console may have ended.
6. Goodyear vs. Bridgestone
Goodyear was, for decades, the largest company in Akron, Ohio–the rubber capital of the world. Firestone was based there. As was Goodrich. Goodyear was also the largest tire company in the world. It supplied a substantial portion of the tires for the Big Three, which until the 1980s controlled the car industry. Akron suffered from the same problem that Detroit did. It had an extremely high cost of labor compared to competitors–particularly those in Japan. Firestone was bought out by Japan’s leading tire company–Bridgestone–in 1988. Bridgestone was a white knight. Firestone was in the midst of the defense of a hostile takeover by Pirelli. Goodyear probably missed a chance to match Bridgestone’s action. It was a time of consolidation in the industry. The next year, Michelin purchased Dunlop. Large rubber companies had decided to use M&A to develop scale and market share. Bridgestone sales rose from $13.5 billion in 1999 to $20.5 billion 2009, according to Bruce Davis of Tire Business. Goodyear’s only rose from $11.5 billion to $15.6 billion in the same period.The industry has begun another period of market share change. The South Koreans and Chinese have aggressively entered the market and firms in Japan, the US, and Europe have a new market share battle with which they must contend.
7. Charles Schwab vs. TD Ameritrade
Charles Schwab & Co., Inc began to offer discount brokerage service in 1975, which made it the first firm in the business. Full service brokerage firms like Merrill Lynch assumed that Schwab was a fad. Customers wanted the advice a full service brokers could give, and would not invest based on their own without the research resources that old line firms could offer. Full service brokers were wrong. Schwab had revenue of $4.25 billion last year. The discounter had the market to itself initially, but a number of discount brokers entered the market led by mutual fund companies like Fidelity. The business became mainstream. Canadian-controlled TD Ameritrade began as a US based company in 1987. It went through a large number of M&A events and became known as Accutrade, The company rolled up All American Brokers and The R. J. Forbes Group. Accutrade parent Ameritrade merged with Datek Online in 2002. Canadian broker TD Waterhouse merged with Ameritrade in 2005 and Waterhouse’s parent TD bank became the controlling shareholder with a current ownership of 46%. TD Ameritrade’s revenue increased from $2.54 billion in 2008 to $2.56 billion in 2010. Charles Schwab’s revenue decreased from $5.15 billion in 2008 to $4.25 billion in 2010.
8. Omnicom vs. WPP
The television show “Madmen” is based in the 1960s, a period when US-owned advertising agencies dominated the US advertising market, which was the largest in the world. The market was controlled by companies like BBDO, DDB, Campbell Ewald, McCann Erickson, and their predecessor firms. Most of the firms were eventually bought by two American holding companies–Omnicom and Interpublic–and one firm based in the UK–WPP. M&A activity was driven by a need to develop scale so that global clients could have access to research firms, PR firms, and and advertising agencies, all of which operated under one umbrella. WPP began as Wire and Plastic Products. Control of the firm was taken by Martin Sorrell in 1985 because he wanted a publicly listed company under which he could consolidate marketing firms. He was an improbable man to create a large global advertising conglomerate–a former financial executive for ad operation Saatchi & Saatchi. Management of large ad agencies was still dominated by people from the creative side or those who handled client relationships. Sorrell pulled off a coup when he bought global agency giant J Walter Thompson in 1987. He went on to buy another American icon–Ogilvy Group, and then one of the world’s leading research firms–TNS. WPP is now the largest marketing firm in the world with revenue of $12.1 billion, ahead of the $11.7 billion of US-based Omnicom which held the top spot as measured by revenue in 2009.
Douglas A. McIntyre