What is Specialization?

Definition: Specialization involves concentrating your effort in a particular direction. Companies usually specialize in producing certain goods. They develop expertise and skills that help them to manufacture these goods in the most efficient manner. Countries could specialize, too. Many companies in Japan and Germany possess a high degree of engineering skills.

What does Specialization mean?

Specialization helps you to stay ahead of the competition. For example, a CPA may decide to concentrate on taxation issues. Similarly, a lawyer could focus on divorce cases. In both these instances, specialization would allow the individual to concentrate in one area and develop a deep level of knowledge in that field.

Companies can specialize in making specific products. Apple specializes in making smartphones and tablets. Google’s expertise lies in online search. Amazon has perfected the art of selling products at the lowest possible price.

A country can also gain by specializing in a particular area. China’s economic development in the last few decades owes a great deal to the abundance of cheap labor in the country. This advantage allowed it to expand its manufacturing base and become the world’s largest exporter of goods.

In recent times, countries like Vietnam, Cambodia, and Bangladesh have used their low-cost labor to develop their apparel manufacturing industries. This has allowed them to boost exports and provide jobs to the local population.

Example of Specialization

Adam Smith was a Scottish economist, and the author of The Wealth of Nations, a book that is regarded as one of the most important texts on the subject of economics. He wrote about the division of labor and the advantages of specialization.

In the example that he provided in his book, he described a pin factory. If each of the ten men employed at this factory carried out all the tasks associated with making pins, they would be able to produce only ten or 20 pins on an individual basis every day. However, if they specialized and each of them focused on a single sub-task, the total productivity would rise to 48,000 pins a day.


Specialization can help individuals, companies, and even countries. The division of labor and a focus on the tasks in which you have a natural advantage can lead to significant gains.