Competition is one of the things that makes stock market investing so interesting, and the interaction of market forces, strategy, execution, luck and dozens of other factors all have a say in forging a successful business.

Identifying a business that is currently lagging its main competitor, but has the building blocks in place to close the gap, or even become number one, can be a highly profitable strategy.

So do any of the three businesses on this list meet the criteria?

For a long time, Woolworths Limited (ASX: WOW) was the bluest of blue chips, and a solid addition to any portfolio. Now, despite still having the largest number of supermarkets in the country, it has consistently trailed its main rival, Coles, in like-for-like store sales growth and earnings.

At the same time, Aldi has taken away foot traffic and market share from both. Woolworths now has cast off the dead weight of its hardware division, prioritised its supermarkets division and has a change specialist, Brad Banducci, at the helm of the business.

However, the long-term strategy for running down Coles is unclear, with minor initiatives like increasing staff numbers and a new rewards program failing to create any discernable change as yet.

Fairfax Media Limited (ASX: FXJ) competes in the metro newspaper market, but its main growth engine is the Domain.com.au property advertising website.

However, Domain ranks a distant second behind the dominant portal, REA Group Limited’s (ASX: REA) Realestate.com.au. Domain gets smashed on almost every metric, but the most important of these are time spent on site and number of unique visitors per month.

In online classifieds advertising, the rule of the last few decades has been “winner takes most” due to entrenched network effects, with second place players often struggling to give browsers a compelling reason to change their habits. Fairfax and Domain appear to fall squarely in this category.

Australia and New Zealand Banking Group (ASX: ANZ) shareholders could be forgiven for thinking they’d backed the wrong “Big 4” bank, with shares falling more than all of its peers in the last 12 months.

However, while the banking sector as a whole has faced headwinds, ANZ has added a few company specific ones of its own. First and foremost is the low-performing nature of its loans in Asia, which were the centrepiece of former boss, Mike Smith’s strategy for the bank.

Only now are the below average returns on equity and higher-than-average default rates coming to light. In addition, ANZ has a higher than average exposure to defaulting loans from the mining slowdown, with a recent announcement about higher levels of cash having to be set aside to cover likely losses triggering the latest share price dive.

Foolish takeaway

Of the three businesses on this list, ANZ appears the least likely to climb to number one in its industry due to the strength of its competitors and its own weaknesses. Fairfax and Domain also do not appear to have a credible strategy to take away Realestate.com’s advantage.

Woolworths may be the closest to a closing the gap on its rivals, with a competent management team, dominant liquor division, a large store footprint and world-class supply chain already in place to help drive a turnaround.

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Motley Fool contributor Ry Padarath has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.