Strong A strong competitor has a market share nearly equal to that of the largest competitor in the industry. It enjoys above-average profitability, and it usually has financial leverage at or below the industry's average. Favorable A company with a favorable competitive position has a market share somewhat below the largest competitor's, average profitability and average financial leverage. Weak A company with a weak competitive position has a market share well below that of the largest competitor, below-average profitability and above average financial leverage. It includes the company's busines goals and the broad courses of action it plans to achieve them.
Strategy has important implications for a company's cash flows.
In new, high-growth markets, it makes sense for companies to try to be market leaders, although this usually means negative cash flows until growth begins to slow. In markets with fast growth, just keeping a constant share of the market makes large demands on cash for capital expenditures and net working capital regardless of share. Or they can leave at once by selling a business to a competitor, getting a single large infusion of cash. Growth in any market eventually slows, and maintaining share in low-growth markets usually generates surplus cash. To gain market share, lagging companies have to cut prices or increase spending or both, reducing profitability.