Second, empirical evidence was found that customers do value specialized firms due to their focused capabilities.
The bigger rival has to weigh up whether accommodating the SME weighs out the cost of fighting it. Same refers to launching a product which is much more costly when launching it in the mass market rather than in the niche market.
If the supplies being used by a company are common and easy to find the suppliers will have weak to moderate influence. Supplier power is thus identified as only negative issue among all the five forces.
The more competition the more power the buyer has. Another force that Porter stressed the need to look into was the intensity of the rivalry of competitors already in the market. Many SMEs pursue a focus strategy by which a segment is concentrated on but has a bigger rival as competitor within.
Thus, a SME is having a competitive advantage when it offers a substitution product in a niche market that outweighs the benefits for a bigger rival to compete with it.
Before a SME chooses a market segment that is ignored by a bigger rival, thus intending to pursue a niche strategy, it must have developed a sustainable competitive advantage just like the label printing office and that will deter the bigger rival to compete against the SME.
Porter next turned to economic development and competitiveness, where his work focused on the microeconomic underpinnings of national and regional economic development.