What are the advantages and disadvantages of specialization?

The primary advantage of specialization is that a business or worker can build a reputation for expertise in a given area. A major drawback is that specialization limits opportunities to develop in other areas, which is challenging when demand for the specialization wanes.

A company that specializes often attracts customers who want the best of a given solution, but the lack of diversification creates a greater propensity for up-and-down earnings. A worker who specializes may earn more money based on that specialization, but that worker may face a layoff when the area of specialization is less important to an employer.