Updated May 24, 2023
Introduction to Focus Strategy
Focus strategies are among three of Porter’s archetypal strategies; these three strategies cost leadership, differentiation, and focus. All three strategies have one goal: to deliver superior value to the customers. These strategies are based on certain principles of competitive advantage: delivering superior value to customers and earning an above-average return for the company and the stakeholders. The overall focus is on delivering the best product to the customer better than anyone else.
What is Focus Strategy?
The strategy is the determination of objectives and long-term goals, the adaptation of actions, and the allocation of resources necessary for carrying out this goals-chandler. A strategy is quintessential about the future in which there is uncertainty. A strategy is all about planning for the next day or future and is expected to get the best results; we need to cope with the uncertain tomorrow and be prepared by preparing today against future possibilities. Strategy decisions are not easy yet complex, the expected future may arise from complex, social, technical, and other interactions, and strategy made the previous day can save the situation.
Steps to Achieve Success to Reach Goal Through Proper Strategy
It requires a description of the mission and objectives, which should also have the organization’s financial performance; the description should be for a defined time zone. To get the exact knowledge of mission and vision statements, a statement of strategic intent, and an assessment of stakeholders and stakeholders, the company carries out strategic intent and stakeholder analysis.
It describes the organization’s scope in which the market they are looking to compete. The organization needs to make the right choices; the choices can be on the same channel but should not go beyond knowledge. The choices are also made if the organization’s focus is just the home market or if it will go multinational, which can be product-market diversification.
The articulation is important for the benefits the firm can bring to itself and its customers within the choice of the market it makes. The organization should keep in mind why the customer should buy the product. Why should a customer buy from you? What value can a firm make from making a proposition to the customer?
There should be strategic logic behind competitive advantages; this can be strategies in two parts-one is positioning the logic in the market (market-based logic), which underpins the company’s competitive advantage ambitions.
Market Focus Strategy
If opting for this strategy, the organization is aiming for lower costs than competitors serving that market segment or the ability to offer niche members different from competitors. The focus strategy is the selection of buyers who have distinctive preferences. When the strategy is based on the buyer’s segment whose needs are less costly to satisfy comparatively in the market, then the focus strategy is based on low cost. Likewise, a buyer in the differentiation segment requires a unique product. Focus strategy targets a specific market segment, focusing on a selected customer group, product range, geographical area, or service line. It adopts a narrow competitive scope within an industry.
The Focus strategy aims to grow market share by operating in a niche market or market with less competition. The niche market involves geography, buyer characteristics, product specification, and requirements. The success of a focus strategy is considered when an industry segment is large enough to have growth potential compared to its competitors. Larger and mid-sized firms use a focus strategy with differentiation and cost leadership generic strategy.
Competitive Strategies for Different Market Positions
Five competitive strategies for a different market position are as follows –
1. Overall Low-Cost Provider Strategy
Making great efforts to achieve lower costs than competitors and appealing to broad customers usually goes on by under-pricing competitors.
2. Broad Differentiation Strategy
The strategy is to present a different product than that of rivals in a way that will appeal to a broad spectrum of buyers.
3. Focused Low-Cost Strategy
This segment focuses on narrow market buyers and competition with buyers in the same scenario. The company must keep lower prices to serve niche members at a lower price than that of rivals in the market.
4. Focused Differentiation Strategy
The company focuses on narrow buyers and competes with rivals by offering customized attributes to the niche members better than the rivals in the market.
5. Best Cost Provider Strategy
For this segment, the focus is to provide the best product at a better cost; the value for the money is the focus by incorporating good to excellent product attributes at a lower cost than rivals. The focus is to have the lowest costs and prices when compared to competitors’ attributes they offer.
- Low-Cost Leadership Strategy: This is based on the ability of the organization can provide a product or service at a lower cost than its competitors. The assumption behind a low-cost strategy is that it acquires a substantial cost advantage over rivals that can be passed on to the customers to gain a larger profit or market share. A low-cost strategy can produce an advantage where a firm can earn a higher profit margin by selling products at the same market price as rivals. These products are aimed to be sold at a lower cost and appeal to an average customer in a broad target market. Sometimes these products have high standards and are not customized to individual customer’s tastes, needs, or desires. So, the firm can benefit from economies of scale and experience the effects of a low-cost leadership strategy followed by modifying products. Low-cost leadership strategies can also be applied in services-based businesses for benefits.
- Advantages of Building a Low Cost: A strong market can allow the firm to convince its rivals not to start price wars within the industry; this means the low-cost firms can set the stage for pricing discipline within the market. It is easy for low-cost firms to keep competition out of the industry through their price-cutting power; this can be a substantial obstacle to firms contemplating entry into the industry.
This is a guide to the Focus Strategy. Here we discuss the definition and five competitive strategies for a different market position along with steps to achieve success to reach goals and market focus strategy. You may also look at the following articles to learn more–