The Rule of Three

Name any industry and more likely than not you will find that the three strongest, most efficient companies control 70 to 90 percent of the market. Here are just a few examples:

• McDonald's, Burger King, and Wendy's
• General Mills, Kellogg, and Post
• Nike, Adidas, and Reebok
• Bank of America, Chase Manhattan, and Banc One
• American, United, and Delta
• Merck, Johnson & Johnson, and Bristol-Myers Squibb

Based on extensive studies of market forces, the distinguished business school strategists and corporate advisers Jagdish Sheth and Rajendra Sisodia show that natural competitive forces shape the vast majority of companies under "the rule of three," This stunning new concept has powerful strategic implications for businesses large and small alike.

Drawing on years of research covering hundreds of industries both local and global, The Rule of Three documents the evolution of markets into two complementary sectors — generalists, which cater to a large, mainstream group of customers; and specialists, which satisfy the needs of customers at both the high and low ends of the market. Any company caught in the middle ("the ditch") is likely to be swallowed up or destroyed. Sheth and Sisodia show how most markets resemble a shopping mall with specialty shops anchored by large stores. Drawing wisdom from these markets, The Rule of Three offers counterintuitive insights, with suggested strategies for the "Big 3" players, as well as for mid-sized companies that may want to mount a challenge and for specialists striving to flourish in the shadow of industry giants. The book explains how to recognize signs of market disruptions that can result in serious reversals and upheavals for companies caught unprepared. Such disruptions include new technologies, regulatory shifts, innovations in distribution and packaging, demographic and cultural shifts, and venture capital as well as other forms of investor funding

Years in the making abd sweeping in scope, The Rule of Three provides authorative, research-based insights into market dynamics that no business manager should be without.

• Introduction: The Rule of Three: What It Is and How It Works

1. Four mechanisms for increasing Efficiency
2. Where Three Is Not a Crowd
3. Specialists and Generalists
4. The Ditch
5. Globalization and the Rule of Three
6. Strategies for Generalists
7. Strategies for Specialists
8. The Disruption of Markets

• Conclusion
• Appendix 1: A Brief History of Mergers in the United States
• Appendix 2: Market Snapshots
• Appendix 3: The Big Three

I am not really sure that I agree with all of their points, as some of their examples are a bit fishy (Enron, United, etc.). Also, it is a bit hard to digest into something useful, but you may see it as a way to analyse markets/industries.

To be quite frank, the Rule of Three is extremely old and has been applied in many contexts, but this is the first time I've seen it in a business context, therefore I believe it is at least worth reading.