What is fragmented market?

Answer 1

A fragmented market is one where there are lots of small to mid size companies and where even the big players have stiff competition. There should be no dominant company. No company should have a double digit percentage of the market or at worst low double digits. This is a critical factor for entrepreneurs. The reason this is the most critical factor is because of what it represents. First, it indicates that there are customers for this type of product. If you want to give yourself the best chance to succeed you need to enter a market where there are already customers looking for a solution. You don't want to have to spend a lot of time and money explaining to potential customers why they need a solution for problem X. You want a market where they already know they have a problem and are looking for solutions. Creating markets is the province of the visionary entrepreneur not the practical one. Second, while there is lots of competition there is no competitor who is dominant. There is no competitor who you will always be compared against and have to stand up to. Third, lots of other companies talking about the market and advertising in the market helps you. It creates awareness for potential customers all without you having to spend a cent. A rising tide raises all ships, etc. Finally, in a varied market there's sure to be several companies which you compare very favorably against. Hence, you become a best of breed product when compared to these lesser alternatives. Since there's no obvious product to choose, potential customers will end up taking a somewhat random sampling of the market and you'll have a better chance at being seen as a best of breed option when compared to a random set of alternatives.