What is Concentration Strategy
A Concentration Strategy is a business strategy in which an organization focuses its resources on a specific market or product line. This type of strategy involves specializing in a particular niche or area of expertise and may involve targeting a specific customer segment or geographic region.
Concentration strategies can be used to achieve a number of goals, such as increasing market share, achieving economies of scale, and differentiating the organization's offerings. They can also help to build expertise and reputation in a particular area, which can be a competitive advantage.
There are several types of concentration strategies that an organization can use, including:
- Market niche concentration: Focusing on a specific market niche or segment that is underserved or has unique needs.
- Product line concentration: Focusing on a specific product line or category, and developing a deep expertise in that area.
- Geographical concentration: Focusing on a specific geographic region or market, and building a strong presence in that area.
Concentration strategies can be effective in helping an organization to achieve a competitive advantage and drive growth. However, they can also be risky if the organization becomes overly dependent on a particular market or product line, or if it fails to adapt to changing customer needs or market conditions.
- Product Development - Another type of concentration strategy where a company focuses on introducing new products into existing markets.
- Market Segmentation - The practice of dividing a market into distinct subsets of consumers with common needs or characteristics; often a precursor to adopting a concentration strategy.
- Competitive Advantage - The edge a company has over its competitors, often the aim of a concentration strategy.
- SWOT Analysis - A strategic planning tool used to identify strengths, weaknesses, opportunities, and threats, often used to inform concentration strategy decisions.
- Core Competencies - The unique capabilities that give an organization an advantage in meeting the needs of its target market, often the focus of a concentration strategy.
- Business Model - The framework that outlines how a company creates, delivers, and captures value; may be influenced by or built around a concentration strategy.
- Strategic Management - The overarching field that deals with the major initiatives taken by a company's top management, of which concentration strategy is a subset.
- Corporate Strategy - A broad term that refers to a company's plan to achieve its business objectives, encompassing various individual strategies like concentration strategy.
- Mergers and Acquisitions (M&A) - Business activities where companies either combine (merge) or one company buys another (acquisition); sometimes used to achieve objectives related to a concentration strategy.