- Focus strategy is adopted when company wants to take gain of competitive advantages with both low cost per unit and differentiated unique product but company does not want to focus on industry wide rather company wants to focus on narrow scope.
- Focus strategy means producing products and services that fulfil the needs of small groups of consumers.
- Focus strategies are most effective when consumers have distinctive preferences or requirements and when rival firms are not attempting to specialize in the same target segment.
- An organization, using a focus strategy, may concentrate on a particular group of customers, geographic markets, or on particular product-line segments in order to serve a well-defined but narrow market better than competitors who serve a broader market.
- Risks of pursuing a focus strategy include the possibility that numerous competitors will recognize the successful focus strategy and copy it, or that consumer preferences will drift toward the product attributes desired by the market as a whole.
- A focused cost leadership strategy requires competing based on price to target a narrow market. A firm that follows this strategy does not necessarily charge the lowest prices in the industry.
- Focused differentiation: A focused differentiation strategy requires offering unique features that fulfil the demands.
- Some firms, using a focused differentiation strategy, concentrate their efforts on a particular sales channel, such as selling over the internet only. Others target particular demographic groups. Firms that compete based on uniqueness and target a narrow market are following a focused differentiations strategy. For example, Rolls-Royce sells limited number of high-end, custom-built cars.
How to Achieve Focused Strategy
To achieve focused cost leadership/differentiation, following are the measures that could be adopted by an organization:
- Generating high efficiencies for serving niche markets.
- Originating superior skills for catering to such niche markets.
- Developing innovative ways in managing the value chain.
- Selecting specific niches which are not covered by cost leaders and differentiators.
Advantages of Focused Strategy
Premium prices can be charged by the organizations for their focused differentiated product or services.
In case of focused low cost, company can dominate the market with customer loyalty.
Due to the tremendous expertise in the goods and services, organizations offer distinct products of services.
Benefits can be understood in respect of following:
- Rivals –There is no clear rivals, as there is a niche market for the company.
- New entrants –There is significant threats to the company. It is because big players are not interested in entering into so narrow market.
- Buyers – There is no pressure of bargaining from Buyers as they have already distinct preference.
- Substitute-There is no threats from substitute, It is because buyers are too loyal to the company because of differential features.
- Suppliers –There is no pressure of bargaining power from suppliers, it is because suppliers are well aware of situation and contented too.
Disadvantages of Focused Strategy
- The firms lacking in distinctive competencies may not be able to pursue focus strategy.
- Due to the limited demand of product/services, costs are high which can cause problems.
- In long run, the niche could disappear or be taken over by larger competitors by acquiring the same distinctive competencies.
Best-Cost Provider Strategy
Fig.: The Five Generic Strategic Alternative
The new model of best cost provider strategy is a further development of above three generic strategies. It is directed towards giving customers more value for the money by emphasizing both low cost and upscale differences. The objective is to keep costs and prices lower than those of other sellers of comparable products.
The objective is to keep costs and prices lower than those of other sellers of comparable products.
Best-cost provider strategy involves providing customers more value for the money by emphasizing low cost and better quality difference. It can be done:
- Through offering products at lower price, than what is being offered by rivals for products with comparable quality and features, or
- Charging similar price as by the rivals for products, with much higher quality and better features.
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