focus strategy also carries more risk, because you are building up resources and competencies in only one narrow area.
Focus strategy involves an organization concentrating on one particular market or market niche and becoming expert in that area. Customers buy from that organization because they are the best in that field.
A focus strategy for an airline, for example, may be to fly only business-class passengers in private jets. There are many examples of focus strategy being used to great effect: German car manufacturer Porsche, for example, focuses only on sports cars and has a global reputation for doing so. However, focus strategy also carries more risk, because you are building up resources and competencies in only one narrow area.
Comparing the Three Strategies
Cost Leadership
Advantage - Can be easy to implement
Disadvantage - Can be difficult to sustain--you are vulnerable to being undercut by your competitors.
Differentiation
Advantage - Premium pricing can mean more money is available for activities that maintain the advantage, such as R&D
Disadvantage - The source of differentiation can become stale over time and new “extras” need to be developed.
Focus
Advantage - Can give very high profit margins and lead to a market-dominating position.
Disadvantage - Risky: Market niche may change or disappear; if you are successful, big firs may try to muscle in on your market.
ACTION POINT: Develop the strategy or combination of strategies that will maximize your position in the market.
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