Developing competitive position in fragmented markets through generic strategies

Abstract

A competitive position is about determining how an organization will “differentiate” itsproducts / services and create value for its served market. It's about creating a position in the competitiveenvironment, putting organizations stake in the landscape, and acquiring mindshare in the marketplace.As defined by Michael Porter a fragmented industry is an industry in which no firm has a significant market share that can strongly influence the industry outcome. An industry is fragmented for variety of reasons. Company can overcome fragmentation by employing various strategies. The three strategies proposed by Porter are: ‘overall cost leadership’, ‘differentiation’ and ‘focus’.

A low-price strategy pursues to achieve a lesser price than competitors at the same time trying to uphold comparable perceived product or service benefits to those presented by competitors. A differentiation strategy pursues to deliver products or services benefits that are different from those of competitors and that are broadly valued by buyers. While in case of the focus strategy the strategic target is narrow market. The two focus strategies an organization can employ are focussed cost leadership and focussed differentiation. A focused differentiation strategy strives to provide high perceived product / service benefits giving good reason for a sizeable price premium, generally to a selected narrow market segment.

This study looks at generic strategies and their application in achieving a competitive position in a fragmented industry.