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Generic Strategies: Presented by R.Antlin Jenifer MBA 905

The document discusses Michael Porter's three generic business strategies: cost leadership, differentiation, and focus. Cost leadership involves having the lowest production costs in the industry. Differentiation means creating unique product features that allow charging premium prices. Focus involves targeting either low costs or differentiation at a specific niche market segment. The strategies can be applied broadly or narrowly. The document provides advantages and disadvantages of each generic strategy.

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36 views13 pages

Generic Strategies: Presented by R.Antlin Jenifer MBA 905

The document discusses Michael Porter's three generic business strategies: cost leadership, differentiation, and focus. Cost leadership involves having the lowest production costs in the industry. Differentiation means creating unique product features that allow charging premium prices. Focus involves targeting either low costs or differentiation at a specific niche market segment. The strategies can be applied broadly or narrowly. The document provides advantages and disadvantages of each generic strategy.

Uploaded by

augastin
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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GENERIC STRATEGIES

Presented By
R.Antlin Jenifer
MBA 905.
GENERIC SRATEGIES
Michael Porter has suggested that the firm’s strength
ultimately falls into any of the two headings: cost
advantage and differentiation.
Three generic strategies
Cost Leadership
Differentiation and
Focus
Three generic strategies are applied at the business unit
level.
Porter’s Generic Strategies
TARGET SCOPE LOW COST DIFFERENTIATIO
N

BROAD Cost Leadership Differentiation


Strategy Strategy

NARROW Focus Strategy Focus Strategy


(Low Cost) (Differentiation)
Cost Leadership Strategy
The competitive advantage of the organisation lies in
the lower cost of products or services relative to what
the competitors have to offer.
The Organisation outperforms its competitors.
The cost leader organisation earns higher profits.
Cost leadership offers a margin of flexibility to the
organisation to lower the price.
Advantages
Low cost serves as a barrier to the new entrant in the
industry.
Arrival of substitute products can be managed with
price reduction.
Intense rivalry is avoided.
Powerful buyers and powerful suppliers will have less
influence on the cost leader.
Disadvantages
Competitors may imitate the cost leader’s methods in
course of time.
Arrival of new lost cost technology pursued by close
rivals.
Technological changes make economies of scale
complete obsolete.
Differentiation Strategy
The competitive advantage of an organisation lies in special
features incorporated into the product or services which is
demanded by the customer and who are willing to pay.
Organisation outperforms the competitors.
A differentiated product or service is distinguishable by the
customers for its features and attributes.
A differentiator organisation can change a premium price for
its product or services.
Profits for the differentiator organisation may come from the
difference in the premium price charged and the additional
cost incurred in providing the differentiation.
Advantages
Differentiation develops brand loyalty in the minds of
the customers.
Brand loyal customers are less sensitive to price
increases.
Powerful buyers usually do not negotiate price
decrease.
Differentiation is an extensive proposition.
Disadvantages
Threat from the competitors who can imitate the
differentiation strategy.
Differentiation fails to work if its basis is something
that is not valued by the customer.
Price premiums also have a limit.
Focus Strategy
Focus business strategy essentially rely on either cost
leadership or differentiation, but cater to a narrow
segment of the total market.
The more commonly used bases for identifying
customer groups are the demographic characteristics,
geographic segmentation or life-style.
For the identified market segment, a focused
organisation uses either the lower cost or
differentiation strategy.
Advantages
A focused company is safeguarded from the
competitors till the rivals copy the product.
Customer loyalty is developed in the niche market.
It allows the company to stay close to the customer.
Focused strategy protects the buyers loyalty.
Disadvantages
Production cost exceeds that of low cost producer.
Powerful suppliers are threat to a focused company.
Niches are often transient.
Niche may sometimes become attractive enough for
the bigger players to shift attention towards them.
Thank You

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