What Is a Fragmented Industry?

A fragmented industry is one in which no major companies drive the direction of the industry. Fragmented industries typically result because a lot of small companies exist in the sector, and it is difficult for one company to establish a large or robust operation.

Some fragmented industries are relatively small, but others are expansive with a lot of companies in operation. A benefit to companies in a fragmented industry is relatively low promotional costs, since most companies operate in local areas. Smaller companies also have the opportunity to attract local customers and build loyalty. A challenge is the inability to have a large operator push the industry forward and establish best practices.