What is the primary risk associated with the focus strategy?

• A. The broader industry may begin to focus on the targeted segment or preferences evolve to match those of the broader industry.
• B. The firm will be unable to achieve economies of scale.
• C. It inevitably fails due to over-specialization.
• D. It requires heavy capital investment with no payoff.

Answer: (A)

A focus strategy concentrates on serving a narrow market segment with tailored offerings. The main risk is that this advantage can be short-lived if the broader industry decides to target the same segment or if customer preferences shift toward what the larger market provides. When the niche gets crowded or tastes move toward mainstream options, the differentiating value of focusing diminishes and the firm can lose its competitive edge. Other downsides like not achieving economies of scale, over-specialization, or heavy capital needs can occur, but they are not the primary threat described here—the key danger is encroachment and changing preferences by the broader market.