Focus strategy

The Focus strategy implies focuses on a specific product market segment with the goal of establishing a monopoly.

1. Focus Strategy Prof. (Dr.) Nitin Zaware Prof. (Dr.) Nitin Zaware 1

2. There could be a small businesses or involved in a single business or a large, complex and diversified conglomerate with several different businesses. The corporate strategy in these cases is about the basic direction of the firm as a whole. In the case of the small firm, it could mean the adoption of courses of action that would yield a better profit for the firm. Business level strategies are concerned with a firm’s industry position relative to those of competitors. Corporate-level strategies are about the choice of direction that a firms adopts in order to achieve its objectives. 2 Prof. (Dr.) Nitin Zaware

3. Focus Strategy: The concept of generic strategies for gaining competitive advantage has received considerable attention recently in the business policy field. Competitive Strategy, a modern classic of business thinking, provides a strong conceptual foundation for developing corporate strategy. Generic competitive strategies are the marketing strategy any of three strategies for marketing products or services: cost leadership, differentiation, and focus . The Focus strategy implies third focuses on a specific product market segment with the goal of establishing a monopoly. Prof. (Dr.) Nitin Zaware 3

4. Focus Strategies: A focus strategy is an integrated set of actions that is designed to produce or deliver products or services that serve the need of a particular competitive segment. Types of Focus Strategies : Prof. (Dr.) Nitin Zaware 4

5. Types of Focus Strategies: i ) Focused Cost Leadership Strategy : Some firms seek to provide customers with affordable solutions for better living through use of the focused cost leadership strategy. ii) Focused Differentiation Strategy : Other firms implement the focused differentiation strategy. There are number of ways to differentiate products or services to serve the unique needs of particular market segments. Prof. (Dr.) Nitin Zaware 5

6. Achieving Focus : Focus is essentially concerned with identifying a narrow target in terms of markets and customers. The firm implementing a focus strategy can adopt the following practices: 1) Identification Gaps : A firm can choose specific niches by identifying gaps not covered by cost leaders and differentiators. 2) Superior Skills : A firm can create superior skills for catering to such niche markets. Prof. (Dr.) Nitin Zaware 6

7. 3) Superior Efficiency : A firm can create superior efficiency for serving such niche markets. 4) Achieving Lower Cost : A firm can achieve lower cost or differentiation as compared to the competitors while serving such niche markets. 5) Use of Innovative Ways : A firm can develop innovative ways to manage the value chain which are different from the ways prevailing in an industry. Prof. (Dr.) Nitin Zaware 7

8. Benefits of Focus Strategies Prof. (Dr.) Nitin Zaware 8

9. Benefits of Focus Strategies 1) Protection from Competition : A focused firm is protected from competition to the extent that the other firms, which have a broader target, do not possess the competitive ability to cater to the niche markets. 2) Capacity to Absorb Price Increments : Focused firms buy in small quantities, so powerful suppliers may not evince much interest. But price increments upto a certain limit can be absorbed and passed on to the loyal customers. Prof. (Dr.) Nitin Zaware 9

10. 3) Less Possibility of Shifting Loyalty : Powerful buyers are less likely to shift loyalties as they might not find others willing to cater to the niche markets as the focused firms do. 4) Substitute Barrier : The specialization that focused firms is able to achieve in serving a niche market acts as a powerful barrier to substitute products/services that might be available in the market. 5) Effective Entry Barrier: Due to the focused specialization, the competence of the focused firms acts as an effective entry barrier to potential entrants into the niche markets. Prof. (Dr.) Nitin Zaware 10

11. Limitations of Focus Strategies Prof. (Dr.) Nitin Zaware 11

12. Limitations of Focus Strategies 1) Difficulty in Achieving Competence : First of all, serving niche markets requires the development of distinctive competencies to serve those markets. The development of such distinctive competencies may be a long-drawn and difficult process. 2) Difficult to Move onto Other Segments : Being focused means commitment to a narrow market segment. Once committed, it may be difficult for the focused firm to move onto other segments of the market. Prof. (Dr.) Nitin Zaware 12

13. 3 ) Cost Configuration : A major risk for the focused firm lies in the cost configuration. Typically, the costs for the focused firm are higher as the markets are limited and the volume of production and sales small. 4) Transient Nature of Niches : Niches are often transient. They may disappear owing to technology or market factors. For instance, a new technology may make the process of making the niche products easier. In the same way, there might be a shift in the consumer’s needs and preferences causing them to move to other products. Sometimes the rising costs of niche products may cause the customers to move to the lower-priced products of cost leaders. Prof. (Dr.) Nitin Zaware 13

14. 5) Rival’s Move : Rivals in the market may sometimes out-focus the focused firms by devising ways to serve the niche markets in a better manner. Prof. (Dr.) Nitin Zaware 14