When a company specializes in one category of products, it is able to focus all of its efforts on making the best product possible. Such a focus can create a competitive advantage for the company and even allow it to command higher prices, leading to higher earnings. Even if the market for a specialized product is small, this group of customers is often willing to pay more for a hard to find product.
Specialization can have disadvantages in the cost of materials and labor. Just as customers are willing to pay more for specialized products, companies may also have to pay more for rare raw materials. Talent (i.e., labor) can be difficult to attract as well as specialized skill sets are generally in demand, leading to higher wages for such employees.
