In other markets the firm’s best strategy might be to focus on a particular market segment or niche and compete on the basis of quality in that niche. If the other firms are preoccupied with the “mass market,” where orders are larger or there is a concentration of buyers wanting a rather standardized product (and there is already a strong
cost leader) or where there are already several firms successfully differentiating their products, there might be a profitable opportunity to cater to the buyer who wants a distinctly different version of the product or service. People with special tastes, a desire to be distinguished from others, a desire to express themselves through their purchases, or a desire to flaunt their wealth may be willing to pay substantially more for a product that more closely mirrors their tastes. The firm following a quality-focus strategy must strive to produce this good for the customer at a price premium that exceeds the additional cost of differentiation, as compared with the standard fare.
Example: Rolls-Royce automobiles claim to be the best cars in the world, and in some respects they might be. They are hand built, and attention to detail is fastidious. They are very expensive, costing as much as three exotic sports cars, or as much as ten or fifteen compact or economy cars. Accordingly, they are not very common, and a passing Rolls-Royce always attracts plenty of attention, both for itself and because it may be transporting a celebrity. The exclusiveness of owning a Rolls-Royce probably attracts as many buyers as the mechanical specifications do. If wealthy people like to show their wealth, and if celebrities like to receive attention, this car is for them.
In any market there may be opportunities for the quality-focus strategy. Custom-tailored clothes, luxurious homes, exotic automobiles, higher-quality professional services, and “better” educations, for example, are sold in markets in which some firms follow quality-focus strategies alongside the more broadly based differentiation and cost leadership strategies of others. Several smaller breweries and wineries compete with the majors by limiting their output to “premium” brands and “limited editions.” Other examples abound, and they seem to illustrate that a firm can shield itself from direct competition from larger firms and from lower-cost firms by limiting its purview to a specialized niche in the overall market. In this niche it can earn above- average rates of profit if it is able to identify the wants and needs of its customers correctly, design a product to suit those customers, and attract their business at a relatively high price.