STRATEGY FORMULATION: SITUATION ANALYSIS AND

BUSINESS STRATEGY

How To Create a Successful Niche Business, Unless you have unlimited startup
funding, a niche business is a “must” for a solopreneur. Serving a well-defined niche requires
fewer resources, reduces competition, and increases your odds of success. Take marketing, for
example. Niches make marketing infinitely easier. When you have a niche, you know who your
ideal customer is. You understand their wants, needs. You are able to develop products and
services that meet their needs.

What Is a Niche
• A niche is:

1. a situation or activity specially suited to a person’s interests, abilities, or nature:

“She found her niche in life.”

2. a special area of demand for a product or service.

• A niche is a focused, targetable portion of a market.

• Your niche is not the same as the field in which you work. For example, a retail clothing
business is not a niche but a field. A niche would be “cold-weather gear for deer hunters.”

Characteristics of a Niche Business

Niche businesses cater to highly defined markets that are often over-looked, underserved or
disenfranchised by larger competitors.

A good niche has five qualities, according to Entrepreneur.com:

• It takes you where you want to go — in other words, it conforms to your long-term vision.
• Somebody else wants what you have — these will be your customers.
• It’s carefully planned.
• It’s one-of-a-kind, the “only game in town.”
• It evolves, allowing you to develop different profit centers and still retain the core business, thus
ensuring long-term success.

How Broad or Narrow Should a Niche Be?

A true niche is well-defined and specific, according to marketing expert Jay Ahret. There may
actually be no one else doing exactly what you do, he says.

Seth Godin says that the secret to being the best in the world is to make the “world” smaller to
narrow your niche. There is a story circulating, of a restaurant owner in Pakistan, "Savour Foods"
who has his best focused Rice specialty. It was a niche that didn’t exist before, but it spread, it
attracted rice lovers, it created a tribe that supported him by becoming regular customers. The
owner is passionate about his recipes and is not willing to share it, but opened many outlets to
serve rice. We can say: It’s possible that you will choose a niche that’s too small. But it’s much
more likely you’ll shoot for something too big and become overwhelmed. “When in doubt,
overwhelm a small niche,” There is another good example of successful niche from Pakistan,
Tehzeeb or Rahat bakers which created a special niche, and a bad example from Lahore "Nirala
sweets" which failed to maintain its propitious niche.

Your niche is too narrow if there’s not enough potential business for you to reach future goals.
Your niche is too broad if you don’t have a clear picture of who your customer is and what they
want and need.

Here are 10 reasons to go very narrow, from Val Nelson of ValNelson.com:

1. Research about going narrow shows you’ll get better customer loyalty.
2. People pay better attention when they can visualize what you’re describing.
3. You can easily become the go-to person on your area of expertise for a small audience.
4. It’s the fastest way to grow your business and credibility.
5. It won’t take long at all to become a known expert on a subject where very few have
specialized.
6. It’s easier to rank higher in a web search for unusual search terms.
7. Not only are more people finding you with a narrow niche, more of them are ready to sign on
because you’re “the one” in their minds.
8. People are more willing to pay for your expertise.
9. Your brain is more able to focus on one audience.
10. You’ll be more able to truly understand their needs and how to best serve them. Focus is a
powerful force that feeds you more and more over time. You won’t have time to stay current on
multiple topics.

What industry forces might cause a company's propitious niche to disappear?

Newman's argument for a propitious niche includes the implication that a corporation with
such a niche will be successful so long as it fills that niche. This niche is the specific
competitive role held by a corporation, division, or product/service. A "propitious" niche is
that which is so well-suited to the firm's internal and external environment that competitors
are not likely to challenge or dislodge it. In terms of automobiles, both Rolls Royce and
Morgan fill two very different niches in the industry.

The key to answering this question is understanding that a propitious niche exists not only
because of environmental opportunities, but also because a company has the resources to
take advantage of these opportunities. Therefore a niche can disappear because of changes
within a company as well as because of environmental changes. Some of the possible
changes are:

a. The environment/industry changes. The company/SBU continues to make its

products or services, but the size of the market changes.

1) Contracts - The market gets smaller because of factors beyond the control of the
company/SBU. For example, the increasing price of gasoline in the 1970s
contracted the market for gas-guzzling, performance-oriented automobiles.
The niche could then only support the strongest companies/SBUs.
 2) Expands - The company/SBU, through its own efforts, not only fills a demand
in the market but actually causes the market to expand. Unless the
company/SBU can manufacture sufficient products to meet growing demand
or is able to defend a patented process (as Proctor & Gamble did with Crest-
Fluoride toothpaste for years), profit opportunities will cause competitors with
sufficient internal resources to join the niche. Such competitors may be
stronger and drive the original company/SBU out of the market, thus causing it
to lose its niche.

b. The company/SBU Changes. The same market demand continues for specific
products or services, but the company/SBU itself changes so that there is no longer a
synchronization between itself and the market.

1) Contracts - Due to demands for resources elsewhere in the corporation, the

company/SBU may be forced to cut back its activities. It is unable to satisfy
market demand. Customers either leave the market by buying a substitute
product or stay in the market by buying a competitor's product. Such
unfulfilled demand encourages competitors which may drive the original
company/SBU out of the niche.

2) Expands - Its own success in the niche may cause the company/SBU to move
into nearby niches. The need for resources in the battle for new niches may
cause the company/SBU to take its original niche for granted. Small
competitors may take advantage of the lack of concern by fighting to expand
their piece of the market, thereby squeezing the company/SBU out of the
original market and thus out of its niche.

If a company/SBU loses its niche, it is likely to become much less profitable unless it can find
a new niche. The specifics of what might happen depends upon how the company/SBU
originally lost its niche. The possibilities for class discussion can be almost endless.

Niche product: Pakistan important market for Ulysse Nardin, CEO

KARACHI:
Who can forget the intense media frenzy that followed the newly elected Prime Minister
Nawaz Sharif appearing in parliament in June last year while flashing his expensive, glitzy
wristwatch? Most pundits thought wearing a Louis Moinet, costing around $4.6 million, ill-
behoved of a prime minister of a country whose per-capita GDP is only $1,257 (2012). After
all, only a handful of Pakistanis could afford such a luxury, they contended. Indeed, ultra-
rich Pakistanis are a tiny minority. But evidence suggests they make a clientele that is
sizeable enough to lure expensive Swiss watchmakers into Pakistan that is otherwise
categorised as a lower middle income country by the World Bank.
According to the CEO of Ulysse Nardin – a Swiss brand that exports wristwatches to
countries in all the continents of the world – the company is going to expand its presence in
Pakistan because its timepieces have consistently sold in good quantities over the last six
years.
“Even though Pakistan’s per-capita income is very low, there are still a lot of affluent watch
connoisseurs here,” Ulysse Nardin CEO Patrik P Hoffmann told The Express Tribune during
his recent visit to Pakistan.

Ulysse Nardin, which is one of the only four privately-held Swiss watchmakers, sells about
25,000 pieces worldwide every year. Going by Pakistani standards, Ulysse Nardin
timepieces are arguably expensive. For example, the retail price of a Ulysse Nardin
wristwatch currently on sale at an outlet located in the upscale Dolmen Mall in Clifton is
Rs2.4 million.

According to the company’s local partner, the cheapest Ulysse Nardin wristwatch costs
anything north of Rs200,000. There is no upper cap, they say, as the retail price of some of
Ulysse Nardin timepieces can be extremely high.

“When we talk about expansion, we don’t mean thousands of pieces. We’re a niche brand.
So our target market is restricted,” Hoffmann noted.

So what exactly is the Swiss watchmaker looking at in terms of annual number of units
sold? Hoffmann says selling “a few hundred pieces” annually is a lot for a market like
Pakistan given the price range of Ulysse Nardin.

“Pakistan is an important market for us. Pakistani clientele is sophisticated. They

understand our timepiece is not just a fashion brand but also a niche brand. You need
consumers who appreciate and enjoy what it takes to produce a timepiece like this,”
Hoffmann says.

Ulysse Nardin timepieces sell at two outlets in Karachi and one outlet in Lahore and
Islamabad each. Its collaboration with another Islamabad outlet is currently being planned.
According to official data released by the Swiss watch industry, total exports of timepieces
to Asia during the January-March quarter increased 3.6% on a year-on-year basis.
However, the increase was primarily driven by the surge in exports to the Middle Eastern
(5.8%) and Far-Eastern (5.3%) countries.

Exports of Swiss watches to other Asian countries, including Pakistan, declined 7.6% over
the same period, data shows.

“No doubt we have had a decline (in growth) in some Asian countries like everybody else,”
he said, quickly adding that high-value customers from these markets, particularly
mainland China, now prefer to go to Switzerland for such purchases. “What you don’t see
in exports statistics is the growth that we have had within Switzerland, which is amazing,”
he noted.

Hoffmann says sales of Ulysse Nardin are almost equally divided among four regions – the
Americas, Europe and the Middle East, Russia and ex-Soviet states, and Asia, including
Pakistan, each contribute 25% in the total sales of Ulysse Nardin.

“It shows the kind of potential Pakistan has. I see growth in Pakistan, India and China. The
future is going to be in these markets,” he said.

Published in The Express Tribune, May 2 nd,