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How to be the best no. 4, 5 or 6 you can possibly be

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This story appears in the April 2002 issue of Entrepreneur. Subscribe »

Nike, Adidas and Reebok. American, United and Delta. McDonald's, Burger King and Wendy's. In scores of industries from footwear to fast food, Jagdish Sheth and Rajendra Sisodia found the three strongest, most efficient companies usually controlled 70 to 90 percent of the market. That's significant for entrepreneurs, Sheth and Sisodia say in The Rule of Three (Free Press, $27.50), because if you're not one of the Big Three in your field, you have two choices: Become a niche player, prospering in a small but profitable corner of the market, or become an in-betweener who conducts a perilous existence in what they call "the ditch."

According to the authors, entrepreneurs--especially those in maturing markets--must specialize in markets and products, target narrow demographics and otherwise fill particular niches if they hope to coexist with the dominant competitors. Companies in the ditch, they say, almost inevitably have to compete on price with the better-equipped rivals. Without the efficiencies of giants or the higher margins of specialists, most ditch-dwellers fail or are acquired.

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