The advantage that focused companies have over their broad market rivals is that they can:
A) sell on non-price factors, such as design or customer service.
B) respond to demands for deep price discounts.
C) can establish a cost advantage and customize offerings for a niche market.
D) initiate a price war to grow volume and drive its weaker rivals out of the industry.
E) absorb cost increases that may be passed on downstream by powerful suppliers.

Question

Quizplus · Accepted Answer

Focused companies have a smaller target market which allows them to understand customer needs and create customized offerings. By doing so, they can establish cost advantages and offer something unique to their niche market. This makes it more difficult for broad market rivals to replicate their offerings and compete on price alone. Focused companies are not necessarily able to respond to deep price discounts or initiate a price war as they do not have the same economies of scale as broader companies. They can, however, differentiate themselves on non-price factors such as design or customer service. They may also struggle to absorb cost increases from suppliers.

The Advantage That Focused Companies Have Over Their Broad Market