## Focus Strategy
Focus strategy is one of Michael Porter's three generic strategies. Unlike cost leadership and differentiation (which target broad markets), focus strategy targets a narrow, specific market segment (a niche).
### Two Variants
| Variant | Basis of Competition | Target |
|---|---|---|
| Focused Cost Leadership | Price | Narrow, price-sensitive niche |
| Focused Differentiation | Uniqueness/features | Narrow, quality/feature-seeking niche |
> Key principle: The niche must be large enough to be profitable but small enough to be ignored by major industry players.
### Focused Differentiation — In Depth
Requires offering unique features that fulfil the demands of a narrow market. Firms may concentrate on:
- A particular sales channel (e.g., internet-only)
- A specific demographic group
- A high-end customer segment with specialized needs
### Advantages of Focus Strategy
1. Premium pricing — Differentiated niche products command higher prices.
2. Strong customer loyalty — Deep niche expertise builds lasting relationships.
3. Reduced competition — Major players tend to ignore small niches.
4. Better resource allocation — Concentrated efforts yield higher ROI.
5. Barriers to entry — Specialized expertise is hard for rivals/new entrants to replicate.
### Disadvantages of Focus Strategy
1. Limited market size restricts growth potential.
2. High costs — Specialized resources and limited demand inflate operating costs.
3. Distinctive competencies required — Firms lacking these cannot effectively pursue focus.
4. Niche risk — In the long run, niches can disappear or be captured by larger competitors who acquire the same competencies.
5. Imitation — Success attracts imitators, eroding competitive advantage.
6. Market change risk — Shifts in customer preferences can suddenly reduce niche demand.
### Dual Focus (Cost + Differentiation)
A firm may pursue both focused cost leadership (for price-sensitive niche customers) and focused differentiation (for premium niche customers) simultaneously within the same narrow market — though this requires strong competencies in both cost control and differentiation.