A defined segment in a market in which a company can compete effectively and possibly win a major share of the market. Here an organization focuses effort and resources on a narrow, delimited segment of a market in which competitors have less strength. Competitive advantage is generated specifically for that market niche. Smaller firms often use a niche strategy. A company could use either a cost focus or a differentiation focus. With a cost focus a firm aims at being the lowest cost producer in that niche or segment. With a differentiation focus a firm creates competitive advantage through differentiation within the niche or segment. There can also be potential problems with the niche approach; for example, if the niche is so small or so specialized that it does not give an adequate return to the companies that serve the niche. See also competitive strategy; five forces model.
Subjects: Social sciences — Business and Management