Final answer:
A segment is a smaller part of a larger market with fewer competitors, which is often attractive to small firms. Such segments offer opportunities to operate effectively with more specialized demand, in contrast to oligopolistic markets dominated by a few large firms.
Step-by-step explanation:
A segment is a small portion of a larger market, characterized by fewer competitors and more specialized demand. These segments are often very appealing to firms, especially smaller ones, as they can cater to a specific niche without facing the intense competition present in broader markets. This can also be found in the situation where an industry has economies of scale that are quite small in comparison to the overall market demand. Here, small firms might find their niche segments attractive since they can operate efficiently without necessarily achieving large scales.
Other key factors in a segment may include a well-established reputation, which could either deter or encourage new entrants depending on how formidable and entrenched the existing firms are. For example, if a segment is known for slashing prices in response to new entry, it could discourage potential competitors. Conversely, a segment where firms have well-respected brand names built over many years can become attractive if small firms can differentiate themselves enough to coexist with the established brands.
It's vital to differentiate this small segment from oligopolistic markets, where only a few firms, often large ones, dominate. In an oligopoly, these firms have significant control over pricing and output decisions, generally leading to high barriers to entry for new firms. Small segments, in contrast, are less dominated by any single player and can provide fertile ground for niche firms to flourish.