Earlier in this article, it was concluded that the task of market boundary definition amounts to grouping together a set of market cells, each defined in terms of three dimensions: customer groups, customer functions, and technologies. In other words, a market may comprise any combination of these cells. An additional question must now be answered. Should a business unit serve the entire market or limit itself to serving just a part of it? While it is conceivable that a business unit may decide to serve the total market, usually the served market

is considerably narrower in scope and smaller in size than the total market. The decision about what market to serve is based on such factors as the following:

1. Perceptions of which product function and technology groupings can best be protected and dominated.

2. Internal resource limitations that force a narrow focus.

3. Cumulative trial-and-error experience in reacting to threats and opportunities.

4. Unusual competencies stemming from access to scarce resources or protected markets.

In practice, the choice of served market is not based on conscious, deliberate effort. Rather, circumstances and perceptions surrounding the business unit dictate the decision. For some businesses, lack of adequate resources limits the range of possibilities. Dell Computer, for example, would be naive to consider competing against IBM across the board. Further, as a business unit gains experience through trial and error, it may extend the scope of its served market. For example, the U.S. Post Office entered the overnight package delivery market to participate in an opportunity established by the Federal Express Company. The task of delineating the served market, however, is full of complications. As Day has noted: In practice, the task of grouping market cells to define a market is complicated. First, there is usually no one defensible criterion for grouping cells. There may be many ways to achieve the same function. Thus, boxed chocolates compete to some degree with flowers, records, and articles as semicasual gifts. Do all of these products belong in the total market? To confound this problem, the available statistical and accounting data are often aggregated to a level where important distinctions between cells are completely obscured. Second, there are many products which evolve by adding new combinations of functions and technologies. Thus, radios are multifunctional products which include clocks, alarms, appearance options. To what extent do these variants dictate new market cells? Third, different competitors may choose different combinations of market cells to serve or to include in their total market definitions. In these situations there will be few direct competitors; instead, businesses will encounter each other in different but overlapping markets, and, as a result, may employ different strategies. Strategically, the choice of a business unit’s served market may be based on the following approaches:

    I.  Breadth of Product Line
    A.  Specialized in terms of technology, broad range of product uses
    B.  Specialized in terms of product uses, multiple technologies
    C.  Specialized in a single technology, narrow range of product uses
    D.  Broad range of (related) technologies and uses
    E.  Broad versus narrow range of quality/price levels
    II.  Types of Customers
    A.  Single customer segment
    B.  Multiple customer segments
    1.  Undifferentiated treatment
    2.  Differentiated treatment
    III.  Geographic Scope
    A.  Local or regional
    B.  National
    C.  Multinational
    IV.  Level of Production/Distribution
    A.  Raw or semifinished materials or components
    B.  Finished products
    C.  Wholesale or retail distribution

An Example of a Served Market

The choice of served market may be illustrated with reference to one company’s entry into the snowmobile business. The management of this company considered snowmobiles an attractive market in terms of sales potential. The boundaries of this market are extensive. For example, in terms of technology, a snowmobile may be powered by gas, diesel fuel, or electricity. A snowmobile may fulfill such customer functions as delivery, recreation, and emergency transportation. Customer groups include household consumers, industrial buyers, and the military. Since the company could not cover the total market, it had to define the market market matrix. The company could use any technology gasoline, diesel, or electric and it could design a snowmobile for any one of three customer groups: consumer, industrial, or military.

Served Market Alternatives In the preceding example, the company settled on a rather narrow definition of the served market. It could, however, expand the scope of the served market as it gains experience and as opportunities elsewhere in the market appear attractive. The following is a summary of the served market alternatives available to a business similar to this one.

1. Product/market concentration consists of the company’s niching itself in only one part of the market. In the above example, the company’s niche was making only diesel-driven snowmobiles for industrial buyers.

2. Product specialization consists of the company’s deciding to produce only dieseldriven snowmobiles for all customer groups.

3. Market specialization consists of the company’s deciding to make a variety of snowmobiles that serve the varied needs of a particular customer group, such as industrial buyers.

4. Selective specialization consists of the company’s entering several product markets that have no relation to each other except that each provides an individually attractive opportunity.

5. Full coverage consists of the company’s making a full range of snowmobiles to serve all market segments.