Very good question!
I agree with Udayan that you should first clarify the objective.
Once you have done so, you can analyze which market would help you to achieve that particular goal.
Say for example that your goal is revenues. This would be given by:
- Market size
- Market share you can get
Say market size is equivalent, the best market will be defined as the one where you can get the highest market share in this case.
A fragmented market may be good (and a concentrated bad) in terms of market share because:
- Barriers to entry are low (you could enter – unlike a concentrated one where that may be impossible – so at least get some market share)
- The reaction of competitors is low
- It is easier to get market share from the weakest players (at least some of them should be worst than you)
But a fragmented market may also be bad (and a concentrated one good) in terms of market share because:
- Competitors will continue to enter the market in the future
- It may be difficult to grow (which is why the market is fragmented in the first place), unless you have a disruptive product or service
So overall, you should consider both the plus and minus of the fragmented market, and evaluate accordingly if it is the best.