Global niche strategy
Ford management may have gone through some extensive discussion and argument to arrive at the point of acquisitions ("My assumption"). Mr. Nasser believed and argued that there was a shift in car demand; the world is shifting towards niche car markets. Ford motors needed to differentiates their cars to fascinate and capture the niche market.
Differentiation occurs when the products of an organization meet the needs of some customers in the market place better than others.
A differentiation strategy was impossible for Ford motors to be across the broad range of the market e.g. producing volumes of cars and capturing niche market customers. The cost of differentiation while serving the mass market of customers (volumes cars) may be too high: 'if the differentiation involves quality, it may not be credible to offer high-quality and cheap product under the same brand name'. So a new brand name has to be developed and supported.
Then the organization is compelled to adopt a strategy called focus strategy. In the case of Ford motors, to meet the variations of demand they embarked on the acquisition strategy to gain competitive advantage in its target segments.
However, there are some known problems about the niche strategy (sometime called focus strategy) and they listed below:
- By definition, the niche is small and may not be large enough to justify attention.
- Cost focus may be difficult if economies of scale are important in an industry such as the car industry.
- The niche is clearly specialist in nature and may disappear over time.
Some small and medium-sized companies have found that this is the most useful strategic area to explore because none of the problems listed above are insurmountable.