What is Specialization?

Definition: Specialization, sometimes called business dexterity, refers to the ability to produce a good or a service using native resources and focus on understanding the production process of a product and its industry.

What Does Specialization Mean?

What is the definition of specialization? Countries specialize in the production of certain goods and services, thereby gaining a competitive advantage. Productive efficiency is the outcome of specialization because native resources are used effectively to produce a good or a service that foreign countries need more resources to produce or they cannot produce at all. In this context, specializing enables international trade, i.e. the exchange of goods between foreign countries.

The benefits of specialization for consumers is a greater selection of goods, whereas for businesses is greater economic efficiency and opportunities for growth for competing firms in the same industry.

Let’s look at an example.


Company A is a Greek wine producer and exporter in several countries around the world. The company focuses on different segments in the market, based on what customers need, and it uses market segmentation to meet its objectives by effectively using its resources. Also, since the market segments are independent, the risk of failure is mitigated through diversification.

Following the market segmentation, Company A focuses on product specializing. Since Greece specializes in wine production, it can be naturally good at producing wine and reap the benefits of economies of scale. This means that as production increases, the average cost of production decreases. Product specialization also means that the company exports wine to particular markets abroad, seeking to expand its business and enhance its global brand name.

Summary Definition

Define Specialization: Specializing means a company focuses on becoming an expert in an industry or for a product.

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