In what market and competitive circumstances are focused low-cost and focused differentiation strategies not attractive?
What will be an ideal response?
Focused low-cost and focused differentiation strategies are attractive under the following conditions:
• The target market niche is big enough to be profitable and offers good growth potential.
• Industry leaders have chosen not to compete in the niche-in which case focusers can avoid battling head to head against the industry's biggest and strongest competitors.
• It is costly or difficult for multisegment competitors to meet the specialized needs of niche buyers and at the same time satisfy the expectations of their mainstream customers.
• The industry has many different niches and segments, thereby allowing a focuser to pick the niche best suited to its resources and capabilities. Also, with more niches there is more room for focusers to avoid competing for the same customers.
• Few if any rivals are attempting to specialize in the same target segment-a condition that reduces the risk of segment overcrowding.
However, focused low-cost and focused differentiation strategies become unattractive when:
• competitors find effective ways to match the focused firm's capabilities in serving the target niche.
• preferences and needs of niche members shift over time with respect to the product attributes desired by the majority of buyers.
• differences across buyer segments erode and lower entry barriers into a focuser's market niche, thereby providing an open invitation for rivals in adjacent segments to begin competing for the focuser's customers.
• the segment becomes so attractive it is soon inundated with competitors, intensifying rivalry and splintering segment profits.
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