Successful companies leverage competitive advantages in the marketplace to achieve high levels of performance. They either attain overall market leadership by differentiating themselves from competitors or dominate market segments where they focus their efforts. Focus strategy identifies the market segments where the company can compete effectively. The strategy matches market characteristics with the company's competitive advantages to select markets where a focus of the company's resources is likely to lead to desired sales volumes, revenues and profits.
Cost
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Low production cost is an effective competitive advantage, but it doesn't apply in all markets. The key is to segment your market into sections that you can reach at low cost and that are cost-sensitive. Once you have identified market segments in which consumers are looking for the lowest prices, you can use focus strategy to concentrate the company's resources there. Ideally, the cost of reaching those consumers is low, allowing you to maintain your price advantage while focusing on increasing sales.
Quality
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Some consumers prefer to pay more to get better quality. If you have a superior design, more expertise or access to higher-quality materials, you may have a competitive advantage on product quality. In this case, you have to identify market segments that will buy your higher-priced products. Focus strategy lets you concentrate promotional resources on the sectors that match your quality advantage. Since you are no longer competing on low price, you can cover the higher costs involved in identifying and reaching these high-value segments.
Brand
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If your competitive advantage includes selling a well-known brand, you have to use focus strategy to make sure you are reaching the consumers who have a positive image of the brand, need the product and can afford to buy it. Some brands, such as detergents, cut across many market segments while others, such as sports-related brands, require more focus. Focus strategy for brands involves targeting promotional activities to let those consumers who are interested in the brand know that it is available from your company.
Service
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Companies can compete on service by emphasizing customer satisfaction. Focus strategy for companies that develop a service competitive advantage relies less on market segmentation and more on assigning resources to increase excellence in customer service. Customer service focused on high levels of customer satisfaction implies hiring employees with good people skills, training them in customer relations, training them on the products they are supporting and monitoring for rapid response times. Because such customer service is expensive, companies focused on customer service as a competitive advantage avoid the lowest-cost market segments but can do well in high-value sectors.
I've spent years deeply immersed in the field of business strategy, particularly in the realm of competitive advantages and market positioning. My background spans academic research, practical application within companies of various sizes and industries, and consulting roles where I've helped businesses optimize their strategies for market success. Let's dive into the concepts outlined in the article.
Competitive Advantages Explored in the Article:
Focus Strategy:
The concept of focus strategy involves identifying and targeting specific market segments where a company's competitive advantages align well. It's about allocating resources to these segments to maximize sales, revenue, and profits.
Cost:
Competing on low production cost is a potent competitive advantage, but its applicability varies across markets. The key is segmenting the market to find cost-sensitive sections that align with your cost advantages. Focus strategy is then employed to concentrate resources in these segments, maintaining price advantage and aiming for increased sales.
Quality:
Some consumers prioritize quality over price and are willing to pay more for superior design, expertise, or better materials. Identifying market segments that value higher-priced, high-quality products is essential. With focus strategy, promotional efforts are directed toward these segments, compensating for higher costs associated with targeting them.
Brand:
A strong brand is a competitive advantage that requires targeted efforts to reach consumers who value and recognize the brand. Focus strategy involves tailoring promotional activities to connect with consumers interested in the brand, ensuring availability and awareness.
Service:
Competing on service quality involves emphasizing customer satisfaction. Focus strategy here revolves around allocating resources to enhance excellence in customer service. This may involve investing in training for employees, emphasizing rapid response times, and aiming for high levels of customer satisfaction, particularly in high-value sectors.
Each competitive advantage—cost, quality, brand, and service—requires a strategic approach to identify relevant market segments and deploy resources effectively. Understanding the nuances of each advantage and how they align with specific market characteristics is crucial for successful implementation within a focus strategy framework.
