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Determining a business market niche

Scenario: Mark has a new business specializing in hauling construction materials locally. A rancher contacts Mark to see if he has an interest in expanding his business to include livestock hauling. The new business proposal would allow Mark to continue operating locally but would require him to expand to transporting livestock, something in which he has no knowledge.

Question: Should Mark accept the proposal to expand his business to livestock hauling?

  1. Yes. Since the new business proposal would allow Mark to continue operating locally it’s within his market niche and expanding would be a sound business decision.
  2. No. Mark has never hauled livestock and it would be best to continue operating within the market niche where he has the most knowledge.

Click below to see answers.

Determining a business market niche: Answer

Answer: No. A company’s niche in the trucking marketplace should be what they are familiar with or have been successful at, unless the carrier can acquire the expertise.

During economic downturns, it common for carriers to branch into new markets without the requisite expertise in the hopes of keeping trucks moving. The outcome is often even lower profitability due to unanticipated problems. Also, being a new carrier for customers, lowering the price is the easiest and often the only way to gain new business when freight is slow.

However, in most cases the core knowledge base is where they can promote their best business practices and develop a solid customer base. It’s important for a business to go with what they know. Knowing where a business fits in the “transportation chain” and what the company can “sell” to their customers goes a long way toward the continued success of the company.