Comparison of Starting and Ending Market Share Positions
Ending (1997) Starting (1923)

Comparison of Starting and Ending Market Share Positions for Durable Goods
Ending (1997) Starting (1923)

Comparison of Starting and Ending Market Share Positions for Non-durable Goods
Ending (1997) Starting (1923)

n 1923, Wrigley’s had become the established brand leader through extensive advertising. Its main competitor, American Chicle – also known as the chewing gum trust – tended to maximize profits by skimping on marketing. Since 1923, Wrigley’s continued success has been primarily based on three factors: maintaining and building strong brands, focusing on a single product, and being in a category that simply has not changed much.

In 1927, Wrigley’s was an early sponsor of national radio. By some reports, the firm was the largest, single-product national advertiser in the 1930s. Wrigley’s also showed a great commitment to its brands throughout World War II. Due to scarce supplies of the ingredients crucial to its normal quality gum, Wrigley’s pulled its traditional brands and introduced another brand. At the same time, Wrigley continued to advertise traditional brands with the slogan “Remember this Wrapper.” After the war, sales soon surpassed the pre-war level.

More recently, Wrigley has continued to manage its brand equity carefully. When sugarless gum and bubble gum became popular in the 1970s, Wrigley did not reflexively extend its brand. Several years after the sugarless gum market had taken off, it introduced a product, but under the same brand it had used for the World War II-era sub par gum. It wasn’t until 1984 – with “extra” – that Wrigley committed to the sugarless gum market. Meanwhile, in bubble gum, Wrigley used a subsidiary to introduce Hubba Bubba.

The second factor in Wrigley’s long-term dominance is the firm’s unrelenting focus on chewing gum. Even though the company owned the Chicago Cubs baseball team for many years, the team was a sideline to the firm’s main business. For over 100 years, Wrigley has been run by three generations of Wrigleys. Collectively, the family still owns over 40 percent of the company.

In the 1960s, the family chose not to expand into other businesses and referred to diversification as a dirty word. Management rejected joining a conglomerate, American Home Products, even though Warner-Lambert and Squibb had acquired its major competitors. As a single-product company, Wrigley has continued to grow and prosper, domestically and internationally. Over the last 10 years, dollar sales have grown nearly 10 percent per year in what is considered a mature category.

The third factor contributing to Wrigley’s long-term dominance is the fact that chewing gum has changed very little over the years. In some ways, the market has simplified. In the 1920s, at least 25 flavors of chewing gum were available. Today, only mint-flavored gums dominate sales. These minimal changes have made later entry very difficult. In fact, Beech-Nut (now part of Nabisco) was the last major chewing gum company to enter, way back in 1911. Although chewing gum has changed relatively little, Wrigley maintains a serious R&D effort to improve its products and packaging.

nderwood was the leading typewriter brand in 1923. Over the next three decades, Underwood was profitable. But instead of innovating, Underwood sought to collude with its competitors. According to a 1939 federal antitrust indictment, the four largest typewriter manufacturers, who together set prices and cornered 90 percent of the market, met to coordinate activities as early as 1930. One year after the indictment, Underwood and the other three manufacturers agreed to a consent degree that prohibited their monopolistic practices.
During World War II, many companies developed technology that would be useful after the war. But not Underwood. The company’s profitability from 1945 to 1955 was due to pent-up, post-war demand for typewriters, a growing economy, and sales from the Korean War effort. During this period, Underwood continued to pay high dividends rather than invest more in product development and manufacturing. While other companies invested heavily in computer technology, Underwood acquired only tiny Electronic Computer Corporation of Brooklyn in 1952.

In 1956, several factors exposed Underwood’s weaknesses. Lower-priced foreign competitors’ share of manual typewriters began a five-year increase from 15 percent to 40 percent. Outdated manufacturing facilities became too costly, and electric typewriters became more competitive, eventually surpassing sales of manual typewriters in the early 1960s. These conditions led to increasingly large losses and failed efforts at new strategic directions. Underwood spent $12 million to diversify into computers, but gave up after 18 months, lacking the necessary technical expertise.

After a few more unprofitable years, Underwood was acquired by Olivetti. While Olivetti’s U.S. subsidiary returned to profitability from the mid-1960s until 1970, it lost money throughout the 1970s and early 1980s. The Underwood name was phased out, and today, Olivetti is only a very small part of a relatively unimportant category.

Underwood’s lack of innovation stands in stark contrast with IBM. IBM bought Electromatic Typewriter in 1933 and introduced the first successful electric typewriter in 1935. In 1941, IBM introduced proportional letter spacing. In 1961, Big Blue introduced the Selectric typewriter with the “golf-ball” typing element. In 1964, the company introduced an automatic typewriter that stored information on magnetic tape. These advances and others enabled IBM to dominate electric typewriters through the late 1970s.

More important than succeeding in typewriters, IBM leveraged its strong position to become the dominant firm in computers. During World War II, IBM developed the Mark I computing calculator. The company sold its first computer to the government research facility at Los Alamos, New Mexico in 1953 and soon afterwards captured market leadership. IBM’s leadership in important segments of the computer industry continues today.

Underwood’s demise demonstrates the importance of continuous innovation. At least up until the mid-1930s, Underwood was well positioned to be the dominant firm in office automation. Its revenues were about equal to IBM’s in 1937. But by 1957, IBM’s revenues were about 15 times those of Underwood!