Strategic Marketing Basics

Concentrating on a product/market pair is a first coverage strategy. This strategy of concentration on a niche is justified when resources are limited, when the segment is still unexploited or when it is a springboard for future expansion. The main advantage of opting for this strategy is that the company gains better knowledge of the particular needs linked to this segment. Moreover, the specialized operational marketing for this target (distribution network, communication, production) results in economies of scale and a higher return. Risks are nevertheless not excluded from the concentration strategy. Since all eggs are placed in the same basket, a reduction in demand, following a drying up or the arrival of new people coming in, could constitute a significant danger and therefore often prompt companies to opt for diversification strategies to cover several segments and limit these risks.

Specialization according to the product. In this case the company diversifies its range according to a single type of product but in several markets. Some tire manufacturers supply, for example, tires both for cars and for industrial use (trucks, heavy vehicles for civil engineering, etc.). The essential risk is the obsolescence of the product (e.g., appearance of a substitute product).

Market specialization. This type of specialization focuses not only on the product but also on the type of customers and the company becomes a sector specialist. A manufacturer of glasses could, for example, decide to make binoculars, telescopes, microscopes and lenses as well thereby covering the optical instruments market. He therefore becomes hyper-dependent on the health of the sector.

Selective or multi-segment specialization. Following various opportunities (e.g., buying up other companies), the company could opt for a hybrid segmentation. This strategy reduces the risks connected to presence on a single segment.

Global coverage. A company opts for a global coverage when it covers an entire market. This is the case of large industrial groups like Danone, IBM, Procter&Gamble, L’Oréal, Anbev, etc.