What is a fragmented industry?
Fragmented industry is a business sector with many competitors, but no company that has a sufficiently large market share to affect the business decisions of all. Each player is small in view of the market scope. This does not mean that the industry is not profitable or not experiencing growth; Rather, it is rather a sign that there are few obstacles for new competitors and the opportunity to profit is perceived as higher than in other companies.
Small companies is the standard for fragmented industry, which often provides the most common needs of consumers. Restaurants, hairdressing salons and automatic repairs are examples of businesses that thrive in a fragmented industry. Startus costs are usually modest and there is no economy of scope that definitely prefers a large provider over a small business. Many businesses have created a market niche where they provide a unique product or specialized service. The variety of consumer preferences often allows several branches that have profitable KOexistence in one geographical market. Several factors have been identified that contribute to the formation of fragmented industry. Among them is the ease with which the competitor can enter or step out of the industry. There is no significant initial investment in product development, employee training or specialized equipment. Industry regulation will not discourage new competition or subsidized established businesses. Usually, there is no need for losses from expensive assets that cannot be sold or re -performed.
savings from the range reduce the unit costs of the product by expanding the production costs of a large number of uniform goods. This strategy does not apply in a fragmented industry where new products and specialized services prevail. The niche markets are not best operated by mass production. While the economy of the scale increases the geographic reach of the main company, its absence in the fragmented PRuminity tends to limit the geographical scope of the competitors' market.
High transport costs in the product distribution tend to prefer the environment of multiple manufacturers in a limited market area. This can be seen in the industry of building materials with cement, concrete and similar products. It is usually cheaper than transporting them for a long distance. The fragmented industry is stimulated if competitors enter and rise to the market with an increase and decrease in local construction projects.
The perception and preferences of consumers also play an important role in the creation of a fragmented market. The diversity of personal taste creates market opportunities for a wide range of restaurants, clothing stores and entertainment sites in the community. Many consumers consider it reassuring directly to the local supplier than with a distant corporation. In highly specialized services such as rights and medicine, personal trust may be a primary perspective.