Focus—Low Cost or Differentiation

Porter identifies the third strategy—focus. He said that focus strategies can be segmented into

a cost focus and a differentiation focus.

Don't use plagiarized sources. Get Your Custom Essay on
Focus—Low Cost or Differentiation
Just from $13/Page
Order Essay

In a focus strategy, a firm concentrates on one or more segments of the overall market. Focus

can also be described as a niche strategy. Focus strategy entails deciding to some extent that we

do not want to have everyone as a customer. There are several ways that a firm can adopt a focus

perspective:

• Product line. A firm limits its product line to specific items of only one or more product types. California

Cart Builder produces only catering trucks and mobile kitchens.

• Customer. A firm concentrates on serving the needs of a particular type of customer. Weight Watchers

concentrates on customers who wish to control their weight or lose weight.

• Geographic area. Many small firms, out of necessity, will limit themselves to a particular geographic

region. Microbrewers generally serve a limited geographic region.

• Particular distribution channel. Firms may wish to limit themselves with respect to the means by

which they sell their products and services. Amazon began and remains a firm that sells only through the

Internet.

Firms adopting focus strategies look for distinct groups that may have been overlooked by their

competitors. This group needs to be of sufficiently sustainable size to make it an economically

defensible option. One might open a specialty restaurant in a particular geographic location—a

small town. However, if the demand is not sufficiently large for this particular type of food, then

the restaurant will probably fail. Companies that lack the resources to compete on either a

national level or an industry-wide level may adopt focus strategies. Focus strategies enable firms

to marshal their limited resources to best serve their customers.

As previously stated, focus strategies can be bifurcated into two directions—cost focus or

differentiation focus. IKEA sells low-priced furniture to those customers who are willing to

assemble the furniture. It cuts its costs by using a warehouse rather than showroom format and

not providing home delivery. Michael Dell began his business out of his college dormitory. He

took orders from fellow students and custom-built computers to their specifications. This was a

cost focus strategy. By building to order, it almost totally eliminated the need for any incoming,

work-in-process, or finished goods inventories.

A focus differentiation strategy concentrates on providing a unique product or service to a

segment of the market. This strategy may be best represented by many specialty retail outlets.

The Body Shop focuses on customers who want natural ingredients in their makeup. Max and

Mina is a kosher specialty ice cream store in New York City.

ORDER NOW »»

and taste our undisputed quality.