Focus is essentially a strategy of segmenting markets. The segment sought may be defined by a particular buyer group, a geographic market segment, or a certain part of the product line. The logic of this approach is that a firm that limits its attention to one or a few market segments can serve those segments better than firms that seek to influence the entire market.
This strategy - "... the low cost and differentiation strategies are aimed at achieving their objectives industrywide, the entire focus strategy is built around serving a particular target very well, and each functional policy is developed with this in mind" (Michael E. Porter ).
The focus strategy has two variants:
- Cost focus
- In cost focus a firm seeks a cost advantage in its target segment. Cost focus exploits differences in cost behavior in some segments.
- Differentiation focus
- In differentiation focus a firm seeks differentiation in its target segment. It exploits the special needs of buyers in certain segments.
Therefore, the firm achieves either differentiation from better meeting the needs of the particular target, or lower costs in serving this target, or both.
Overall differentiation and differentiation focus are the most often confused strategies in practice. The difference is that the overall differentiator bases its strategy on widely valued attributes, while the differentiation focuser looks for segments with special needs and meets them better.
Both variants of the focus strategy rest on differences between a focuser's target segments and other segments in the industry.
If a firm can achieve sustainable cost leadership (cost focus) or differentiation (differentiation focus) in its segment and the segment is structurally attractive, then focuser will be an above-average performer in its industry. How to define segments and choose a sustainable focus strategy is described in section "Industry Segmentation."
Which generic strategy is a chosen is a function of the firm's strengths and weaknesses combined with the competitor's positions in the market.
However, Porter suggests that, whatever strategy is chosen, the firm should try to maintain "parity" with its competitors. Therefore a differentiator should not completely forget price and a low-cost producer should not forget quality.