Question

Focusing carries several risks, one of which is the:

A. chance that niche customers will bargain more aggressively for good deals than customers in the overall marketplace.
B. chance that competitors will find effective ways to match the focused firm's capabilities in serving the target market.
C. potential for the segment to be highly vulnerable to economic cycles.
D. potential for the segment to become too specialized for other multi-segmented rivals to enter.
E. inability of a company to compete industry-wide.

Answer 1

Focusing on a niche market carries several risks, including aggressive bargaining by niche customers, the possibility of competitors matching the firm's capabilities, and the segment's potential vulnerability to economic cycles.

Step-by-step explanation:

The risks associated with focusing on a single business segment or a niche market include several potential challenges. One such risk is the chance that niche customers will bargain more aggressively for good deals than customers in the overall marketplace. This aggressive bargaining can lead to reduced profit margins for the focused firm. Additionally, there's the risk of competitors finding ways to match capabilities in serving the target market, which may lead to increased competition and pressure on the focused firm's market share. Another significant concern is the segment's vulnerability to economic cycles, which can fluctuate widely, potentially impacting the stability and profitability of the firm specializing in that niche.