FOCUS & NICHE STRATEGIESWhat sets a focus strategy apart is concentrated attention on a narrow piece of the total market.O...
Segment is not crucial to the success of major competitorsFocusing firm has the skills and resources to serve the segment ...
Competitive Strategy, Michael E. Porter (1980) and Thompson & Strickland (1992)Gaining and Soustaining Competitive Advanta...
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Focus & niche strategies

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Focus & niche strategies

  1. 1. FOCUS & NICHE STRATEGIESWhat sets a focus strategy apart is concentrated attention on a narrow piece of the total market.ObjectiveDo a better job serving buyers in the target market niche than rival competitors.Keys to success o Choosing a market niche where buyers have distinctive preferences, special requirements, or unique needs o Developing a unique ability (as compared to rivals) to serve the needs of the target buyer segment Approaches to focusingApproach 1 o Achieve LOWER COSTS than competitors in serving the segment : a low cost producer strategy, but for the target segment only. It requires a buyer segment with needs/preferences that are less costly to satisfy as compared to the rest of the marketApproach 2Offer niche buyers SOMETHING DIFFERENT from other competitors : a differenciation strategy • Requires a buyer segment that demands unique product attributes • For a focuser to earn a sustainable competitive advantage, it must : o be the low-cost producer in its target market niche OR o succeed in offering niche buyers something different from rivals OR o do both (which is difficult) Strategic advantage Consumers perceived Low cost position uniqueness Strategic Industry wide Product differenciation Cost leadership target Particular Cost Product differenciation focus segment leadershipfocusSource : Porter, Competitive strategy : Techniques for analyzing industries and competitors, 1980Examples of focus strategies :Rolls Royce (luxury automobiles) ; Apple Computer (Desktop publishing)What makes a segment attractive for focusing ?Segment is big enough to be profitableSegment has growth potential
  2. 2. Segment is not crucial to the success of major competitorsFocusing firm has the skills and resources to serve the segment effectivelyFocuser can defend itself against challengers via the customer goodwill it has built up and its superior ability to serve buyersin the segmentCompetitive strategy principle :The competitive power of a focus strategy is greatest when :The industry has fast-growing segments that are big enough to be profitable but small enough to be of secondary interest tolarge competitorsNo other rivals are concentrating on the segmentBuyers in the segment require specialized expertise or customized product attributesThe competitive strengths of a focus strategyA focusers specialized ability to serve the target market niche builds a defense against competitive forces (See : Porter 5forces : rival competitors, buyers, suppliers, potential entrants, substitutes)Situations where a focus strategy works bestWhen it is costly or difficult for multi-segment rivals to serve the specialized needs of the target market nicheWhen no other rivals are concentrating on the same target segmentWhen a firms resources do not permit it to go after a wider portion of the marketWhen the industry has many different segments, creating more focusing opportunities and allowing a focuser to pick out anattractive segment suited to its strengths and capabilitiesThe risks of a focus strategyBroad-line, multi-segment competitors may find effective ways to match the focused firm in serving the narrow target marketThe niche buyers preferences and needs may drift more and more towards the product attributes desired by the market as awholeThe segment may become so appealing that it is soon crowded with eager, aggressive rivals, causing segment profits to besplit too many ways.Sources :Strategic Management, Raphael Amit, Professor at Wharton University of Pennsylvania, USStrategy formulation and complementation : Tasks of the General Manager, by Arthur A. Thompson, Jr & A.J.Strickland III, 1992Competitive Advantage, Michael E. Porter, 1985
  3. 3. Competitive Strategy, Michael E. Porter (1980) and Thompson & Strickland (1992)Gaining and Soustaining Competitive Advantage, Jay. B. Barney, Addison-Wesley, 1997Contemporary Strategic Analysis, Robert M. Grant, 3th edition, Blackwell, 1998

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