Concentration Strategy

Posted in Marketing and Strategy Terms, Total Reads: 5420
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Definition: Concentration Strategy

A growth strategy adopted by the company to concentrate by investing more resources in marketing and production of only one primary product or market.


The benefits of the strategy is to build a strong reputation within a market and generate loyalty among the customers. But it has disadvantages because of the nature of shift of the demand of customers due to innovations in technology. This may led to the product becoming obsolete, and also a sudden economic turndown could lead to its failure.


Four concentration strategy options:

 

 

Customers

 

Products

Current

New

Current

Product-Market

Exploration

Product

Development

New

Market

Development

Product/Market

Diversification


Product-Market Exploration Option

Depending on the functional & competitive strategies, firms attempt to increase sales of its current product(s) in its current market(s).For example: The cola war between Coca Cola and Pepsi: where both of them were fighting for the soft drink market. They relied on their marketing activities to gain popularity.


Product Development Option

Due to the demand from its current market firm create new product. For example: Mc Donald in order to gain market share in India


Market Development Option

When a firm sell its current products in areas which were not before served by the firm. The way to increase the market reach is by entering to new retail channels. For example: Starbucks who entered to grocery stores to expand their market base.


Product-Market Diversification Option

Expansion both into new products & new markets, becoming a multi business firm.

For example: Starbucks who have concentrated in specialty coffee.

 

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