What is a concentration strategy?

Concentration strategy is a type of approach used in business and investment situations. As an approach to business, a strategy includes a company that has decided to focus most of its resources on the development of a particular product or at least a small group of products that are focused on a specific market. As an approach to investing, a concentration strategy for the selection of a small group of shares requires a portfolio, rather than going to a more diversified collection of investment. There are benefits and potential obligations associated with the use of concentration strategy, including potential so that it is invested in one market that sudden economic turnover could lead to failure.

As is applied in business operations, the purpose of the concentration strategy is to provide a unique focus on the product line and the market on which the company decides to compete. This may sometimes lead to this particular enterprise to see as a spite of the industry because all the resources areFor aimed at creating and introducing the best possible products in this area. Sometimes the company can choose this course of specialization and achieve so much success that in this industry it will start to set a standard and provide a scale that competitors must seek to stay in business.

After success, concentration strategy allows you to build a strong reputation on the market and also generate a significant value of the name between consumers. In fact, the name of a unique product can be so rooted in consumers' minds that it is commonly used as a slang term for all products of this type, whether it is a company or not. At the same time, the perception of excellent quality is often grown on the basis of the fact that society does one thing and does it well.

While the concentration strategy can work very well, there are some potential pitfalls to this approach. Shifts of consumer requirements could knowMenat that the unique product market is beginning to shrink, which the company could leave financial problems. Innovation in technology can cause the product to be outdated, which will effectively stop production. Companies that diversify are often vulnerable during economic slowdown, especially if the product is perceived as a luxury rather than a necessity. If the enterprise does not have enough financial reserves to set off a decline, there is a great chance that the company will fail.