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Fragmented Industries
Are fragmented due to LOW BARRIERS TO ENTRY (Brand name, econmies of scale, cost advantages) Cleaners, Local bakery, sun tanning parloRS
HIGHLY SPECIALIZED MARKET
COMMODITY TYPE PRODUCT THATS HARD TO DIFFERENTIATE
DISECONOMIES OF SCALE
HIGH TRANSPORTATION COSTS (Cement)
FOCUS IS THE MOST NATURAL STRATEGY
Customer Need, Geography etc..
Chains WAL MART ETC.: BUYING POWER, LOCAL OUTLETS, MANAGERIAL SKILL
But you can consolidate!
Franchises: Mc Donald's. Local store is owned and managed by the same person. Allows rapid growth, Local control and differentiation. LARGE scale advertising. REDUCES FINANCIAL RISK BECAUSE LOCAL OWNERS
HAVE THEIR MONEY INVESTED -NO agency problem
Horizontal Merger-Blockbuster