Market Fragmentation Brand Management and Strategy Vocab, Definition, Explanations Fiveable

Whether it’s caused by globalization, regulatory changes, or market forces, the goal is singapore dollar exchange rate normally to lower costs and boost profits. But just like any other story, there are also downsides to this process. The search for cheap labor and materials often comes at the expense of the local market. Outsourcing the production and manufacturing process takes jobs away from domestic workers, which means an increase in unemployment in the company’s home nation. By going to different suppliers and manufacturers, companies can cut their costs. This benefit can be passed on to the consumer, resulting in more affordable goods and services.

Is market fragmentation good or bad?

It means people can find products or services that feel like they were made just for them, rather than settling for something generic. The 2008 financial crisis saw many consumers become more price-conscious, which led to the rise of budget grocery stores. Advancements in technology will typically lower a market’s barriers to entry for new competitors and enable the creation of tailored products. We’ve quickly seen how the advent of online marketplaces and social media has empowered small businesses to reach specific customer groups more easily.

Fragmented Market vs. Concentrated Market: What’s the Difference?

Understandably, figuring out how to grow or scale your professional services Top esg stocks business in a fragmented market can seem hard. After all, you can’t just go with the typical approach, which involves consolidating the market via acquisitions and roll-ups. A prime instance of a fragmented market is the fast food sector, with its almost endless supply of eateries to choose from. The opportunities to serve are spread out among countless organizations rather than concentrated among just a few key players. From a broad brushstroke perspective, a fragmented market is essentially a large market with plenty of providers.

Companies spread the production process across different suppliers and manufacturers when they fragment. As such, companies use separate suppliers and component manufacturers to produce their goods and services. For example, consider the organic food business, where customers seek gluten-free, vegan, or local choices. Because no one company can meet all food needs, the market comprises companies specializing in different things.

Within the accounting market alone are specialized financial services including retirement planning, tax preparation, forensic accounting, auditing, and fiduciary (property) accounting. Or the cost advantage a business enjoys because of the size of its operations. Globalization – with the help of the internet – is responsible for the popularity of anime outside of Japan, and K-pop outside of South Korea. Whereas today anime and K-pop fan bases are easily found in Western countries, they were far more niche two decades ago.

Business Class

Market fragmentation often spells trouble for an industry’s big guns – the giants who’ve long relied on casting a wide net to catch as many customers as possible. These larger enterprises, with their mass-market strategies, suddenly find that their one-size-fits-all approach starts to look a little out of touch. Fragmented markets provide more choice, catering to a wider array of tastes and preferences.

A concentrated market also makes it easier for an existing player to dominate and increase their profits. Market fragmentation is based on the premise that each market has diverse customer needs, groups, and marketing responses. These many parts, which are typical of every market, indicate fragmentation. One of the best examples of market fragmentation can be seen in the hospitality industry. This causes further fragmentation as these organizations seek to dominate progressively smaller or niche markets. Therefore, it stands to reason that markets with existing barriers to entry are not likely to be fragmented.

1. There is not just one company that makes smartphones with all the power.
2. By going to different suppliers and manufacturers, companies can cut their costs.
3. Market fragmentation is the concept that all markets are diverse and over time break into distinct groups of customers (i.e., fragments)—especially as markets grow.
4. Holding an MBA in Marketing, Hitesh manages several offline ventures, where he applies all the concepts of Marketing that he writes about.
5. A fragmented market is one where no single company can steer the industry.
6. Market fragmentation happens when multiple competing firms offer highly-incompatible technologies or technology stacks, likely leading to vendor lock-in.

However, you decide to differentiate your comic book store by offering a large selection of comics written, drawn, and targeted at women, who you recognize as an enthusiastic but under-served market. You would also invite female comic writers and artists for in-store meet-and-greet sessions, and hold monthly specials for female comic book fans. While you would still attract the male market for traditional comic books, you would also attract women customers who finally have a store that caters to their needs. More importantly, you would now have a decidedly competitive advantage. For some businesses – especially the larger industry incumbents – market fragmentation often spells trouble. One big market transforming into multiple smaller ones will naturally lead to a rise in competition that can compromise a once dominant position for the clear leader.

“Market fragmentation” also found in:

Media fragmentation involves the division of media outlets, giving consumers more choice in the type of content they receive. For instance, the industry is broken up based on target audiences, such as conservative viewership, left-leaning consumers, adolescents, people who enjoy fashion, and sports enthusiasts among others. Product quality may also suffer because of the use of cheaper labor and materials. Going abroad to produce goods can also lead to this problem since laws and regulations vary in different countries.

Success necessitates a strategic strategy, which includes a thorough awareness of consumer preferences, adaptability, and unique products. Businesses can achieve long-term success in their industries by utilizing the market’s benefits and tackling its obstacles. A lack of distinctive offerings in a fragmented market usually indicates that the market is currently fractured or may become fragmented. Because all businesses in such a market compete well, there forex brokers reviews and ratings are usually no significant barriers to new entrants.

Two common varieties of fragmentation are market fragmentation and version fragmentation.Fragmentation is the opposite of, and is solved by standardization. Fragmentation in computers involves storing a single file in several different locations on a hard drive or other storage devices. This often occurs when individuals create, move, make changes, or delete files. This type of fragmentation can lead to lower computer speeds and a drop in efficiency. An industry that is far too fragmented can often be problematic as outlets may find it difficult to reach their target audiences. The industry is further fragmented by how consumers receive their information, from television and radio to newspapers and digital sources.