The document discusses focus and niche strategies. It defines a focus strategy as concentrating attention on a narrow piece of the total market. The objectives are to better serve buyers in the target niche market than competitors. Keys to success include choosing a niche with distinctive buyer preferences and developing a unique ability to serve that niche's needs. Approaches to focusing include achieving lower costs or offering something different for the niche. The competitive advantages of focus strategies are building defenses against rivals by specializing in a niche's needs. Focus strategies work best when serving a niche's specialized needs is difficult for multi-segment competitors. However, risks include competitors matching the focus or the niche drifting to mainstream preferences over time.

1. FOCUS & NICHE STRATEGIES
What sets a focus strategy apart is concentrated attention on a narrow piece of the total market.
Objective
Do 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 focusing
Approach 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 market
Approach 2
Offer 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
Consumer's perceived
Low cost position
uniqueness
Strategic
Industry wide Product differenciation Cost leadership
target
Particular Cost
Product differenciation focus
segment leadershipfocus
Source : Porter, Competitive strategy : Techniques for analyzing industries and competitors, 1980
Examples of focus strategies :
Rolls Royce (luxury automobiles) ; Apple Computer (Desktop publishing)
What makes a segment attractive for focusing ?
Segment is big enough to be profitable
Segment has growth potential

2. Segment is not crucial to the success of major competitors
Focusing firm has the skills and resources to serve the segment effectively
Focuser can defend itself against challengers via the customer goodwill it has built up and its superior ability to serve buyers
in the segment
Competitive 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 to
large competitors
No other rivals are concentrating on the segment
Buyers in the segment require specialized expertise or customized product attributes
The competitive strengths of a focus strategy
A focuser's specialized ability to serve the target market niche builds a defense against competitive forces (See : Porter 5
forces : rival competitors, buyers, suppliers, potential entrants, substitutes)
Situations where a focus strategy works best
When it is costly or difficult for multi-segment rivals to serve the specialized needs of the target market niche
When no other rivals are concentrating on the same target segment
When a firm's resources do not permit it to go after a wider portion of the market
When the industry has many different segments, creating more focusing opportunities and allowing a focuser to pick out an
attractive segment suited to its strengths and capabilities
The risks of a focus strategy
Broad-line, multi-segment competitors may find effective ways to match the focused firm in serving the narrow target market
The niche buyer's preferences and needs may drift more and more towards the product attributes desired by the market as a
whole
The segment may become so appealing that it is soon crowded with eager, aggressive rivals, causing segment profits to be
split too many ways.
Sources :
Strategic Management, Raphael Amit, Professor at Wharton University of Pennsylvania, US
Strategy formulation and complementation : Tasks of the General Manager, by Arthur A. Thompson, Jr & A.J.
Strickland III, 1992
Competitive Advantage, Michael E. Porter, 1985

3. Competitive Strategy, Michael E. Porter (1980) and Thompson & Strickland (1992)
Gaining and Soustaining Competitive Advantage, Jay. B. Barney, Addison-Wesley, 1997
Contemporary Strategic Analysis, Robert M. Grant, 3th edition, Blackwell, 1998