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Focus Strategy(Short Tutorial)
Focus Strategy(Short Tutorial)
Focus Strategy(Short Tutorial)
Focus Strategy(Short Tutorial)
Focus Strategy(Short Tutorial)
Focus Strategy(Short Tutorial)
Focus Strategy(Short Tutorial)
Focus Strategy(Short Tutorial)
Focus Strategy(Short Tutorial)
Focus Strategy(Short Tutorial)
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Focus Strategy(Short Tutorial)

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  • 1. Focus Strategy
    • Strategic plan under which a firm concentrates its resources on entering or expanding in a narrowly defined market segment.
    • The firm focuses on a narrow niche market in which to build a strong competitive advantage.
    • It is usually employed where the firm knows its segment and has products to competitively satisfy its needs.
    • Focus allows businesses to compete on the basis of low cost, differentiation, and rapid response against much larger businesses with larger resources.
    • The objective of the firm is to do a better job at serving the buyers in the target market than the rivals.
  • 2. Niche Market
    • A niche is a more narrowly defined customer group seeking a distinctive mix of benefits. Marketers usually identify niches by dividing a segment into sub segments.
    • In focusing strategy the key to success is choosing a market niche where buyers have distinctive preferences, special requirements, or unique needs and developing a unique ability to serve those needs.
    • Example Family Dollar, targets poor urban American families who can not drive to Wal-Marts in the suburbs because they do not own a car. Its is now a growing Fortune 400 Company.
  • 3. What makes a segment attractive for focusing?
    • Size of the segment is big enough to be profitable
    • Size of the segment is small enough to be of secondary interest to large rivals
    • Has good growth potential
    • Less vulnerable to substitutes
    • Not crucial to the success of major competitors
    • Buyers in the segment require specialized expertise OR customized product attributes
    • No other rivals are concentrating on the segment
  • 4. Approaches to focus based strategies:
    • Firms can effectively pursue focus-based strategies only in conjunction with differentiation or cost leadership-based strategies
    • Therefore the firm should either achieve lower costs than rivals in serving the segment- A low-cost strategy
    • OR
    • Offer niche buyers something valuable and different from the rivals- A differentiation strategy
  • 5. Strategy - Cost Focus
    • Here a business seeks a lower-cost advantage in just on or a small number of market segments. The product will be basic - perhaps a similar product to the higher-priced and featured market leader, but acceptable to sufficient consumers. Such products are often called "me-too‘s".
    • For example:
    • HUL used a cost focus strategy in its Wheel detergent line, which it used to reach the price sensitive customers seeking affordable quality.
  • 6. Strategy - Differentiation Focus
    • In the differentiation focus strategy, a business aims to differentiate within just one or a small number of target market segments.
    • The special customer needs of the segment mean that there are opportunities to provide products that are clearly different from competitors who may be targeting a broader group of customers.
    • The important issue for any business adopting this strategy is to ensure that customers really do have different needs and wants - in other words that there is a valid basis for differentiation - and that existing competitor products are not meeting those needs and wants.
    • For Example, Ferrari and Rolls-Royce are classic examples of niche players in the automobile industry. Both these companies have a niche of premium products available at a premium price.
  • 7. Advantages of using focus based strategies:
    • Focus allows businesses to compete on the basis of low cost, differentiation, and rapid response against much larger businesses with greater resources.
    • Focus lets a business learn its target customers- their needs, special considerations they want accommodated- and establish personal relationships in ways that differentiate the smaller firm or make it more valuable to the target customer
    • Low costs can be achieved filling niche needs in a buyer’s operations that larger rivals either do not want to bother with or cannot do as cost effectively
    • With enhanced knowledge of its customers and intricacies of their operations, the small, focused company builds up organizational knowledge about timing sensitive ways to work with a customer. This allows the firm to respond rapidly to customer requirements.
  • 8. Competitive strengths of a focus strategy:
    • Rivals/ Competitors: Rivals do not have ability to meet specialized needs of target clientele
    • Potential Entrants: Focuser’s core competence can act as a barrier
    • Substitutes: Focuser’s core competence provides obstacles to sellers of substitutes
    • Buyers: Focuser’s unique ability to meet niche buyer’s needs can blunt the bargaining power of the largest niche buyers
  • 9. When does a focus strategy work best?
    • When the target market niche is large, profitable and growing
    • When it is costly or difficult for multi-segment rivals to serve specialized needs of the target niche.
    • When no other rivals are concentrating on the same segment
    • When the firm’s resources do not permit it to go after a wider portion of the market
    • When the industry has many different niches and segments, thereby allowing a focuser to pick a competitively attractive niche suited to its own resources.
    • When the industry leaders do not consider the niche to be crucial to their own success
  • 10. Risks in employing focus based strategies:
    • Major competitors that have waited for your business to ‘prove’ the market may get attracted
    • For example, Domino’s proved that a huge market for pizza delivery existed and now faces serious challenges.
    • Firm may become takeover target for large firms seeking to fill out a product portfolio
    • Consumer preferences and needs may shift
    • Also a great risk is slipping into the illusion that it is focus itself, and not some special form of low cost, differentiation, or rapid response, that is creating the business’s success
    • A competitor may find a smaller segment within the target segment and thus out-focus the focuser.

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