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57. Michael Porter and Competitive Advantage for Small Business (Part 7)

Michael Porter’s third generic strategy in Competitive Advantage is focus. In some ways, differentiation (see the last post) and focus go hand in hand. They are both ways of setting yourself apart from the competition and appealing most strongly to a segment, but differentiation is focused on the product or service and looks to modify that – or its presentation – so that those for whom this difference has a positive meaning  will be attracted, wheras focus is about selecting a target group and developing or adapting your product or service specifically for them.

 In order to address a niche it is not essential for your product to be only suitable for that niche; similarly what started as a niche product may develop well beyond it. For instance,  Levi Root’s Reggae Reggae Sauce started life as a speciality food product targeted at the ethnic Caribbean group in the UK, but soon got taken up by the supermarkets and started to find a wider audience. So what was originally a niche product starts to find a broader market. But the start point and initial target is clear – a very specific group of people with perceived differences of taste and cooking tradition who will be drawn to the product. A perfect example of a small business start-up targeting a niche.

On a local level also a specific group may be targeted to find a niche: let’s take as a theoritical example of a bus driver who decides on a new career in self employment offering massage, having completed a course of training and achieved an accredited level of competence. Now any look at a local directory will find a large number of legitimate massage businesses – some claiming 10 years of satisfied customers and others offering a wide variety of treatments: Indian head massage, hot rock massage etc. What chance has our newly qualified person with limited experience and a limited service to offer against this competition? How can this business be first choice for anyone?

Now let’s survey what our business does have to offer: what experience can be used to find an advantage. Well, our person understands about driving buses – and do bus drivers suffer from aches and pains as a result of their driving for which massage can provide help and relief? Many do. Are there enough bus drivers locally to keep the business going long term? That might be difficult. But are there enough people who drive for a living? Almost certainly yes.

And our business already has contacts with many bus drivers and can easily put the word out, may even get support from the company to help meet their duty of care to their staff.

And if you are a driver suffering from aches and pains that you attribute to driving, which massage service will you contact? The one that offers the widest variety of massages, or the one with the longest track record, the cheapest one or the one that specialises in helping aches and pains from driving for long periods? So from having probably the weakest proposition for all of the potential market this business now has the strongest proposition for a minority (but a large enough) segment of the market.

And as a ‘one-man band’ business, the need is for only a limited number of clients, so what is the point of worrying about appealing to everybody as long as you can appeal very strongly to enough people? But so often small businesses make everything they do bland in a desire to say something which will be acceptable to anyone who could buy their services rather than appealing very strongly to a few people who WILL buy them. All things to all people means nothing very special to anyone.

To whom is your business special? It can be even more true in a recession that with overall business levels declining there is a temptation to widen your appeal by becoming less focused. This can have the reverse effect: you fail to appeal to your core audience rather than attracting a new one. So stay focused – or become focused – and if you need to address a wider market, target another niche with a message totally appropriate to that niche.

 Do you look for the niche? Do you focus on the customers in that niche and make yourself their first choice? And when you want to broaden from there, do you ensure you continue to keep your appeal to your existing group of customers and find a strong enough appeal to any new group? There’s the challenge.

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