This report was commissioned to examine whether small and medium enterprises (SMEs) that target only a few market segments will promote their products and services more effectively than SMEs that target the mass market. The research draws attention to Porter’s generic theory of competitive advantage by mainly concentrating on the third of his competitive advantage strategies, the focus strategy. Theory as well as a practical survey was used in order to falsify or approve the research question. Theory revealed Porter’s focus strategy to have several key advantages over a mass market strategy which make firms pursuing such a strategy more effective in their product promotion efforts. First, a focused firm does not have to devote substantial resources into being all things to all people entailing less expenditure of time and money in comparison to a mass market strategy. Second, empirical evidence was found that customers do value specialized firms due to their focused capabilities. Third, a focused firm is less likely to be overwhelmed by great amount of different customer request and is more likely to identify and adapt to market changes in a quick time manner. Besides the advantages of a focus strategy, the research question is only supported when the SME makes bigger rivals to accommodate their existence in the segment(s) by creating circumstances in which the cost for the bigger rival in fighting the SME exceeds the cost of accommodating the SME. 27 SMEs from South Germany have returned completed questionnaires which were used to find practical evidence for answering the research question. Results revealed several tendencies which partly support theory. First, SMEs that pursue a focus strategy are more likely to do this with a differentiation focus and secondly and most importantly they tend to have fewer problems in attracting and retaining customers. There was no indication that focused SMEs are more likely to see and adapt to market changes on an early stage and there was also no tendency visible whether SMEs with a focus strategy are less likely to be overwhelmed with customer requests. In conclusion, theory supports the research question only when the firm is able to adequately implement the focus strategy.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Theoretical Background and Hypothesis
- Focus Strategy and Competitive Advantage
- Porter argues a focus strategy to work out only if a company is able to differentiate itself significantly towards its competitors either by cost or differentiation.
- Porter's Focus Strategy and Criticism
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This research paper examines whether small and medium enterprises (SMEs) that target niche markets will promote their products and services more effectively than SMEs aiming at the mass market. The research focuses on Michael Porter's focus strategy, specifically the third of his competitive advantage strategies, and explores its implications for SMEs.
- The effectiveness of focus strategy for SMEs in promoting products and services.
- The advantages and disadvantages of focus strategy compared to a mass market strategy.
- The role of differentiation and cost leadership in achieving competitive advantage through focus strategy.
- The impact of larger competitors on the success of SMEs utilizing focus strategy.
- The practical implications of focus strategy for SMEs.
Zusammenfassung der Kapitel (Chapter Summaries)
The introduction provides an overview of the research question and the structure of the paper. The theoretical background section explores Michael Porter's focus strategy and its implications for SMEs. This section also examines criticism of Porter's theory and argues that a focus strategy on its own does not guarantee success for SMEs. The practical part investigates the results of a SME survey conducted with 30 SMEs from Southern Germany.
Schlüsselwörter (Keywords)
Focus strategy, competitive advantage, SMEs, market segmentation, differentiation, cost leadership, mass market, niche market, practical survey, theoretical analysis.
- Citar trabajo
- Max Zapf (Autor), 2008, Michael Porter’s Competitive Advantage Theory: Focus Strategy for SMEs, Múnich, GRIN Verlag, https://www.grin.com/document/171572
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