IDENTIFYING MARKET SEGMENTS AND TARGETS

As the phenomenon of globalization is becoming popular throughout the world, organizations, whether small and large, are being forced to shift their focus to choose an adaptive strategy of market segmentation. “Market Segmentation” is a process of dividing the market into smaller segments on the basis of similar or homogeneous needs and wants of customers. The basic purpose of segmentation is selecting only those specific market groups which better suit organization’s resources and which can be exploited with the development of specific marketing mixes that are adaptive to particular market need and wants.  Firms often try to choose those segments where they can easily gain a competitive edge and sometimes first mover advantage. Some smaller firms try to build niches and choose smaller market segments, as they cannot compete in the large segments.  These niches then become blue oceans for smaller companies to grow until the niche also becomes red ocean consisting cut-throat competitive forces.

IDENTIFYING MARKET SEGMENTS AND TARGETS:

The market segmentation strategy helps an organization in developing competitive scope to gain a competitive advantage by configuring the value chain (Porter, 1985, p. 53). This adaptive strategy of segmentation also assists companies to determine in which industry or segment they can compete better and build sustainable competitive advantages by creating solid hurdles between segments (Porter, 1985).   As firms develop marketing mixes in order to a higher value to customers through the application of market segmentation strategy, they, in fact, try in economic terms to create monopolistic or oligopolistic markets. This leads to a price war and price discrimination that is an expanded application of the microeconomic theory (Ferstman, C., & Muller, E., 1993). This microeconomic theory is quite useful when the firm is consumer Product Company that has to face the cut-throat competition from new entrants. However, it is also quite effective in large market segments where companies focus on value preferences to gain

 

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