Why it is important to consider strategic imitation
A danger with all strategies – and particularly one where you are targetting a niche – is that other firms enter your market. You may have identified an underserved segment of the market, that you are better placed to serve than existing larger companies, but if these larger firms decide they want to move into your space, then the initial advantage that you have may disappear. This article explores things that may make it hard for larger firms to imitate your strategy and enter your niche.
Things that may limit strategic imitation
The niche may not be big enough
One of the key reasons why existing larger firms may not enter your niche is that it simply may not be big enough to justify them entering. This is often why niches existing in the first place – smaller opportunities that large firms can’t justify the necessary resources to target. Large firms may simply not think that the opportunity is sufficiently large to justify their attention, and in turn may opt not to enter your market.
The niche is incompatible with the other operations of larger firms
Another reason why larger firms may not enter your niche is that it may not be compatible with the rest of their operations. Potentially you have identified something that is incompatible with how most firms in the market make their money (potentially a different business model, making money in a different way), and it may not be in their interest to try and move into your market – doing so would undercut or be incompatible with their primary approach.
The firms lack a capability, or understanding of the market, that you possess
Another reason why large firms may opt not to enter your niche is that they simply don’t have the capabilities or built-up understanding to successfully compete with a more focused firm. The understanding that you have of your market – their specific needs and ways of meeting those needs – may protect your operations from other firms being able to successfully enter your market, or even attempting to do so.
Final thoughts: Will new firms enter?
Beyond existing larger firms moving into your market, it is also important to consider whether new firms will enter the market. On the one hand, the challenge of new firms may not appear as bad – such companies lack the resources of larger firms. However, new firms are also not constrained by existing operations – and so some of the barriers that prevent existing firms from moving into your niche may not apply.