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In this article, you will learn the basics of concentration strategy. Firstly, we have defined a concentration strategy for you. In the second part, we have discussed the advantages and disadvantages of having a concentration strategy in your business. Lastly, we have discussed different types of concentration strategies, and for your better understanding, we have given some prominent examples that you can relate to!

What is a Concentration Strategy?

Concentration Strategy is known to be a good, sensible, and wise business technique. It centers around a single specialty or a single niche and contends in a similar classification. The world’s driving fast-food brands as McDonald’s, Subway, and Starbucks follow a similar focus strategy by focusing on a particular objective market in one kind of product or service. It’s one of the fundamental purposes for their prosperity.

You can relate to the fact that you are always advised to pick one field to be an expert. Similarly, businesses are advised to operate in one market to help them succeed in their business.

Pros and Cons of Concentration Strategy

Pros of Concentration Strategy

Here are some of the advantages of concentration strategy that include having an economic benefit, competitive advantage, and specialization in the specific product or service.

Economical

An organization uses a concentration strategy to focus on one market or one niche. So the organization offers just one sort of item or service and has some expertise in it after some time, it gives the organization an upper hand, especially economically. Concentration strategy assists the brand with approaching the low-valued crude material and providers.

Assuming you are a customer, what would you prefer? Going for a store specializing in what you need to buy or a general store with less variety and require more effort in looking for the right product?

Competitive Advantage

A company only focuses on one niche and has a wide variety of products or services to choose from. Then again, a business offers a wide range of services or products without giving an assortment in any of them. The customer would visit the one specialty-centered brand over the convenience store. Won’t they?

Specialization

A brand is offering just kinds of services or products to the clients. It is wholly centered around its niche regarding marketing, production, and other business activities. Concentration Strategy assists you with accomplishing specialization in different creation cycles, advertising, and limited-time exercises. Domain in one product or service as part of the concentration strategy makes the cost of production low.

Cons of Concentration Strategy

Here are some of the cons of concentration strategy: limited customer base, diminishing demand, and limited diversification in the business. Read on to learn more about concentration strategies.

Limited Customer

Your target market would be restricted to specific individuals when you offer fewer types of services and products to your customers according to the concentration strategy. Organizations with a broader product portfolio ordinarily have a bigger target market. This means that if a new competitor comes into the market, it would also lessen your portion of the market share of that specific product.

Diminishing Demand

Concentration strategy means that the demand for a specific product or service doesn’t continue as before consistently. It continues evolving. At the point when it begins declining, it will decrease the deals and productivity of your organization.

Restricted Diversification

Concentration strategy somewhat means tying up your resources in one place. All in all, you decide to offer just kinds of service or products. On the off chance that it works, well. Something else, your entire business would be in extraordinary peril. You can’t expand your product portfolio in the focus technique.

Different Types of Concentration Strategies

Here in this section, we will learn about three different concentration strategies: market penetration and product development. A business can use all three, to or even one concentration strategy in their business! 

Market Penetration

Market penetration is one type of market concentration. It includes acquiring an extra portion of a company’s current business sectors and utilizing existing items. You will find different brands trying to get the attention of new customers through marketing advertisements.

Have you ever noticed a Nike advertisement? Nike tends to hire famous athletes to take a piece of the pie inside the athletic shoe business from Adidas and other companies in the same industry.

Concentration Strategies

Product Development

Product development is when a business starts making new products to the existing business sectors. During the 1940s, for instance, Disney extended its contributions inside the film business by introducing motion pictures when before they were only working on kid’s shows. As of late, McDonald’s has continuously moved increasingly more of its menu towards a more healthy menu due to the changing demand of the customers.

The soda business is a common area of product development endeavors. Coca-Cola and Pepsi chose to use this concentration strategy and consistently introduce new products, for example, Coke Zero and Pepsi Cherry Vanilla. Their main objective was to use a concentration strategy to win over the market share or the other smaller competitors.

Concentration Strategies

 

Summary

We started with defining a concentration strategy to create a basic understanding. We moved on to highlighting some main advantages and disadvantages to know what you are getting into before deciding to go for a concentration strategy in your business.

Lastly, we have given you two different concentration strategies that you can use in your business. We have given examples of other famous companies that have used concentration strategies so that you can relate with them.

Coke, Pepsi, Mcdonalds, and Nike, all brands that use concentration strategies in their businesses, have been successful. So, this proves that you can too!

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