You Need to Focus On Your Market First Before Leveraging
Posted on October 23rd, 2008
Small companies sometimes focus on small sheltered market niches in which they are uniquely able to survive. In doing so they attempt to avoid confrontation with major low-cost competitors by occupying niches in a separated market segment which is secluded and profitable. Imitators are companies that do not have sufficient resources, appropriate market position technical skills or organizational commitment to challenge the market leaders.
Market leaders dominate their industries where product and service differentiation and branding are difficult to achieve, where price sensitivity is high and where the market rewards existing suppliers with patronage because the products and services offered are sufficiently established and acceptable to provide satisfaction.
In this market structure imitators copy or mimic successful products. Success does not depend on concentrating exclusively on one competitive position. Many successful companies are cost leaders and differentiators. The buying power and skills and expertise of companies like 3M makes them low-cost companies but they trade on quality, service and brand names. Differentiators can be combined with focus to produce a successful competitive mix: Ferrari and Jaguar in cars; Bang and Olufsen in stereo musical equipment.
Some companies succeed, therefore, by keeping costs down and investing the profits earned in new products and services to stay ahead. Others win by differentiating their products and services to meet the needs of the market in a unique way while smaller companies can sometimes succeed by focusing on special niches with a customized approach. Even imitators can be successful. It is necessary, however, to understand the market, its customers and competitors before choosing a particular approach.
