By Brian Hindo
BusinessWeek, January 30 '06

It's axiomatic that being No. 1 in a market is a good thing. But research by two consultants at Marakon Associates finds that in recent years scale hasn't delivered the advantage you might expect. In analyzing 3,260 public companies, Marakon's Brian Burwell and Jeremy Sicklick discovered that between 1999 and 2004, the median total shareholder return was 1.8% for market leaders vs. 9.5% for non-leaders.

Burwell points out, companies that bulked up through mergers and acquisitions in the 1980s and '90s could exploit gains in productivity, but those gains have slowed in the past five years. Finally, the increasing segmentation of the consumer marketplace has made growth tougher to come by for companies trying to appeal to broad swaths of buyers. "Serving large numbers of customers is less of an advantage today than it was 10 years ago," says Burwell.