Focus or Strategic Scope
This dimension is not a separate strategy per se, but describes the scope over which the company should compete based on cost leadership or differentiation. The firm can choose to compete in the mass market (like Wal-Mart) with a broad scope, or in a defined, focused market segment with a narrow scope. In either case, the basis of competition will still be either cost leadership or differentiation.
In adopting a narrow focus, the company ideally focuses on a few target markets (also called a segmentation strategy or niche strategy). These should be distinct groups with specialized needs. The choice of offering low prices or differentiated products/services should depend on the needs of the selected segment and the resources and capabilities of the firm. It is hoped that by focusing your marketing efforts on one or two narrow market segments and tailoring your marketing mix to these specialized markets, you can better meet the needs of that target market. The firm typically looks to gain a competitive advantage through product innovation and/or brand marketing rather than efficiency. It is most suitable for relatively small firms but can be used by any company. A focused strategy should target market segments that are less vulnerable to substitutes or where a competition is weakest to earn above-average return on investment.
Examples of firm using a focus strategy include Southwest Airlines, which provides short-haul point-to-point flights in contrast to the hub-and-spoke model of mainstream carriers, and Family Dollar.
In adopting a broad focus scope, the principle is the same: the firm must ascertain the needs and wants of the mass market, and compete either on price (low cost) or differentiation (quality, brand and customization) depending on its resources and capabilities. Wal Mart has a broad scope and adopts a cost leadership strategy in the mass market. Pixar also targets the mass market with its movies, but adopts a differentiation strategy, using its unique capabilities in story-telling and animation to produce signature animated movies that are hard to copy, and for which customers are willing to pay to see and own. Apple also targets the mass market with its iPhone and iPod products, but combines this broad scope with a differentiation strategy based on design, branding and user experience that enables it to charge a price premium due to the perceived unavailability of close substitutes.
Read more about this topic: Porter Generic Strategies
Famous quotes containing the words focus, strategic and/or scope:
“Carlyle is not a seer, but a brave looker-on and reviewer; not the most free and catholic observer of men and events, for they are likely to find him preoccupied, but unexpectedly free and catholic when they fall within the focus of his lens.”
—Henry David Thoreau (1817–1862)
“The strategic adversary is fascism ... the fascism in us all, in our heads and in our everyday behavior, the fascism that causes us to love power, to desire the very thing that dominates and exploits us.”
—Michel Foucault (1926–1984)
“In the works of man, everything is as poor as its author; vision is confined, means are limited, scope is restricted, movements are labored, and results are humdrum.”
—Joseph De Maistre (1753–1821)