Published by MBA Skool Team, Last Updated: October 09, 2014
What is 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:
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.
Hence, this concludes the definition of Concentration Strategy along with its overview.
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