Exercises: Competition and niche markets

Define what a niche market is in your own words and give two examples of companies, real or fictional, that target one.

Distinguish between a mass market and a niche market, and classify these offerings: a general burger chain, a vegan burger restaurant, a high-street clothing shop, and a specialist technical clothing shop for wildland firefighters.

The figure shows a broad market containing a small, specialised segment marked with '?'. Explain what this segment is called and give two advantages that an SME might gain by targeting it instead of competing in the general market.

A traditional bakery competes with five others in its neighbourhood; another bakery specialises in gluten-free and nut-free pastries for people with allergies. Compare their situations: competition, customer loyalty, pricing potential, and the risks of each strategy.

Based on these three trends — an ageing population, remote working, and enthusiasm for outdoor sports — propose a specific niche market for each and describe their target customer in one sentence.

Not every niche is viable. Explain three criteria for evaluating a niche (that it is large enough to sustain a business, that the customer can be reached, and that they have both the ability and willingness to pay) and apply them to evaluate the niche 'party clothing for dogs'.

An SME successfully sells climbing gear for beginners in its region until a large sports retail chain copies the product and sells it cheaper. Analyse its options (specialising even further, building a community and services around the product, differentiating on quality, or seeking another niche) and recommend one with supporting arguments.

The founding team of a textile company states: “Our strategy is an indisputable blue ocean: we sell custom-tailored suits exclusively for female executives in the financial sector, with sustainable fabrics at 1,400 pesos and personalized service in their offices.”

1. a) Technically refute the founders' statement: justify why this business model does not constitute a blue ocean but rather a niche or focus strategy, contrasting how each approach acts regarding non-customers and the trade-off between value and cost.
2. b) Design an alternative proposal for this company applying the blue ocean four actions framework (eliminate, reduce, raise, and create), so that it opens up a new market space and defuses traditional competition in professional fashion.

Using viability criteria, evaluate the niche 'online Spanish courses for German professionals working with Mexican companies': estimated size, existing competition, barriers to entry, and willingness to pay. Conclude whether you consider it a good niche and what you would validate before launching.