Focus strategy

A focus strategy is one of Porter's generic strategies based on competitive scope. A focus strategy targets a narrow segment or domain of activity and tailors its products or services to the needs of that specific segment to the exclusion of others.

Focus strategy - one of generic strategies

Competitive strategy is concerned with how a company, business unit, or organization achieves a competitive advantage in its domain of activity. A group of generic strategies helps set focus for businesses. Generic strategies are primary sorts of strategies applicable in a wide range of business situations.According to Porter, strategies allow organizations to gain competitive advantage from three different bases: cost leadership, differentiation, and focus. Porter calls these bases generic strategies

All three are based on the general principle of competitive advantage “the delivering of superior value to customers and, in doing so, earning an above-average return for the company and its stakeholders”.

Cost leadership emphasizes producing standardized products at a very low per-unit cost for consumers who are price-sensitive. Differentiation strategy is aimed at producing products and services considered unique industrywide and directed at consumers who are relatively price-insensitive. Focus strategy means producing products and services that fulfill the needs of small groups of consumers.

There are two alternative types of focus strategies:

• Low-cost focus strategy - offers products or services to a small range (niche group) of customers at the lowest price available on the market
• Best-value focus strategy - offers products or services to a small range of customers at the best price-value available on the market. It aims to offer a niche group of customers products or services that meet their tastes and requirements better than rivals’ products do.

Both focus strategies target a small market. (David, 2011, p. 151)

Best-value focus strategy that offers products or services to a small range of customers at the best price-value available on the market. Sometimes called “focused differentiation,” the best-value focus strategy aims to offer a niche group of customers products or services that meet their tastes and requirements better than rivals’ products do. Both Type 4 and Type 5 focus strategies target a small market. (David, 2011, p. 151) However, the difference is that Type 4 strategies offer products services to a niche group at the lowest price, whereas Type 5 offers products/services to a niche group at higher prices but loaded with features so the offerings are perceived as the best value. Examples of firms that use the Type 5 strategy include Cannondale (top-of-the-line mountain bikes), Maytag (washing machines), and Lone Star Restaurants (steak house), as well as bed-and-breakfast inns and local retail boutiques. (David, 2011, p. 151) l. Likewise, it is not effective to pursue a focus strategy in a large market because economies of scale would generally favor a low-cost or best-value cost leaderships strategy to gain and/or sustain competitive advantage

Focus Strategy is one of Porter's generic strategies based on competitive scope. A focus strategy targets a narrow segment or domain of activity and tailors its products or services to the needs of that specific segment to the exclusion of others. Focus strategies come in two varieties. (Whittington et al., 2019, p.210) The decision to choose a focus strategy is fundamentally one of narrow scope. The advantages of assets, other resources, and competencies developed and used in highly specialized ways result in differentiation and/or cost advantages for certain client groups. (McGee, 2015)

Serving the demands of a specific buyer group better than any competitor is at the core of a focus strategy. As represented in their needs, a cost or differentiation advantage must be provided to the target group. The target market must be kept apart from competing offerings, particularly those from one's own product line. The advantage must be considered to prevent opponents from making up ground. (McGee, 2015)

References

References

• David, F. R. (2011). Strategic Management: Concepts and Cases. Prentice Hall.
• Hill, C. W. L., Jones, G. R., & Schilling, M. A. (2014). Strategic Management: Theory: An Integrated Approach (11th ed.). Cengage Learning.
• McGee, J. (2015). Focus Strategies. Wiley Encyclopedia of Management, 1–2.
• Whittington, R., Regnér, P., Angwin, D., Johnson, G., & Scholes, K. (2019). Exploring Strategy, Text & Cases. Pearson Education.

Author: Annija Petersone