162  Growth consumer electronics retail market in 2009, Walmart reduced prices on key products such as top-selling video games and game consoles, even though Amazon’s $20 billion in sales in 2008 were a fraction of Walmart’s $406 billion sales in the same year. Although Walmart’s competitive reaction could not stop Amazon from surpassing Walmart as the largest U.S. electronics retailer by 2014, it drove down margins across the segment and rewrote the competi- tive dynamics of the electronics category. In concentrated markets, share battles often lead to a cycle of market share give-and-take but rarely to a permanent share gain for any one competitor, unless that competitor changes the product or its delivery enough to create what is effectively a new product. The possible exception, as with the Ama- zon example in the preceding paragraph, is stronger companies gaining share from smaller, weaker competitors and forcing the weaker players out of the market entirely. Price increases, over and above cost increases, can create value as long as any resulting decline in sales volume is small. However, they tend not to be repeatable: if a company or several competitors get away with a price increase one year, they are unlikely to have the same good fortune the next. Furthermore, the first increase could be eroded fairly quickly. Otherwise, you would see some companies increasing their profit margins year after year, while in reality, long-term increases in profit margins are rare. There was an exception among packaged-goods companies in the mid-1990s. They passed on increases in commodity costs to customers but did not lower prices when their commodity costs subsequently declined. But the prospect of higher margins made it more attractive for retailers to enter the packaged- goods segments with offerings of private-label brands, sometimes via online sales channels. There are two main approaches to growing through acquisitions. Growth through bolt-on acquisitions can create value if the premium paid for the target is not too high. Bolt-on acquisitions make incremental changes to a business model—for example, by completing or extending a company’s product offer- ing or filling gaps in its distribution system. In the 2000s, IBM was very suc- cessful in bolting on smaller software companies and subsequently marketing their applications through its existing global sales and distribution system, which could absorb the additional sales without too much extra investment. Because such acquisitions are relatively small, they boosted IBM’s growth but added little cost and complexity. In contrast, creating growth through large acquisitions—say, one-third the size or more of the acquiring company—tends to create less value. Large ac- quisitions typically occur when a market has begun to mature and the indus- try has excess capacity. While the acquiring company shows revenue growth, the combined revenues often do not increase, and sometimes they decrease because customers prefer to have multiple suppliers. Any new value comes Why Sustaining Growth Is Hard  163 primarily from cost cutting, not from growth. Furthermore, integrating the two companies requires significant investments and involves far more com- plexity and risk than integrating small, bolt-on acquisitions. Choosing a Growth Strategy The logic explaining why growth from product market expansion creates greater and more sustainable value than growth from taking share is com- pelling. Nevertheless, the dividing line between the two types of growth can be fuzzy. For instance, some innovations prevent existing competitors from retaliating, even though the innovator’s products and services may not ap- pear to be that new. Walmart’s innovative approach to retailing in the 1960s and 1970s offered an entirely new shopping experience to its customers, who flocked to the company’s stores. One could argue that Walmart was merely taking share away from small local stores. But the fact that its competitors could not retaliate suggests that Walmart’s approach constituted a truly in- novative product. However, if Walmart were to grow by winning custom- ers from Target, that would count as market share gain, because Target and Walmart offer their retailing product in a similar fashion. Notably, over the past decade, Walmart itself has been facing competition from innovative of- ferings in direct and platform sales by Amazon, which has taken significant market share from Walmart in many retail categories. In general, underlying product market growth tends to create the most value. Companies should aim to be in the fastest-growing product markets, so they can achieve growth that consistently creates value. If a company is in the wrong markets and can’t easily get into the right ones, it may do better by sustaining growth at the same level as its competitors while finding ways to improve and sustain its ROIC. Why Sustaining Growth Is Hard Sustaining high growth is much more difficult than sustaining ROIC, espe- cially for larger companies. The math is simple. Suppose your core product markets are growing at the rate of the gross domestic product (GDP)—say, 5 percent nominal growth—and you currently have $10 billion in revenues. Ten years from now, assuming you grow at 5 percent a year, your revenues will be $16.3 billion. Assume you aspire to grow organically at 8 percent a year. In ten years, your revenues will need to be $21.6 billion. Therefore, you will need to find new sources of revenues that can grow to more than $5.3 bil- lion per year by the tenth year. Adjusting for inflation of 1 to 2 percent, you need an extra $4.3 billion to $4.8 billion per year in today’s dollars. Another way to think of it is that to find such revenues, you would need to reinvent a