Premium Essay

Porter’s Generic Competitive Strategies

In: Business and Management

Submitted By Dilhara
Words 5293
Pages 22
IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 15, Issue 1 (Nov. - Dec. 2013), PP 11-17 www.iosrjournals.org

Porter’s Generic Competitive Strategies
Ritika Tanwar
Assistant Professor Department of Commerce Dyal Singh College (M) Delhi University

Abstract

Generic Competitive Strategy:

Basically, strategy is about two things: deciding where you want your business to go, and deciding how to get there. A more complete definition is based on competitive advantage, the object of most corporate strategy: “Competitive advantage grows out of value a firm is able to create for its buyers that exceeds the firm's cost of creating it. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset a higher price. There are two basic types of competitive advantage: cost leadership and differentiation.” Michael Porter Competitive strategies involve taking offensive or defensive actions to create a defendable position in the industry. Generic strategies can help the organization to cope with the five competitive forces in the industry and do better than other organization in the industry. Generic strategies include ‘overall cost leadership’, ‘differentiation’, and ‘focus’. Generally firms pursue only one of the above generic strategies. However some firms make an effort to pursue only one of the above generic strategies. However some firms make an effort to pursue more than one strategy at a time by bringing out a differentiated product at low cost. Though approaches like these are successful in short term, they are hardly sustainable in the long term. If firms try to maintain cost leadership as well as differentiation at the same time, they may fail to achieve either. Keywords: Differentiated,...

Similar Documents

Premium Essay

Asdasdasgasgas

...Analysis Of Porter's Generic Strategies Strategic Themes  Provide product that is on-trend, differentiated, distinctive and inspired by select popular fashion trends and pop culture  for all of our target customers, but with a primary focus on expressive women and expressive moms. Improve brand marketing effectiveness by implementing a “house of brands” architecture that covers all of our major customer segments and builds distinctiveness and focus in our product assortment. Provide a great shopping experience through improved customer engagement, and leveraging our real estate to support  new store formats consistent with the repositioning of our brand. Maintain efficient operations by building greater speed and flexibility into the supply chain to deliver the right product to  the right store at the right time in the appropriate proportions across the approximately 4,600 store network. On-Trend Targeted Product  We identifies fashion trends timely and integrates these insights into on-trend product in our stores. Generic Strategy - Porter  Porter’s generic strategies: low cost, differentiation, specialization. Key stakeholders & their influence. PEST model, macro environment. – Five Forces model, micro/industry environment. Porter's Five Forces Model And Three Generic Strategies Porter's Five Forces Model Porter's Five Competitive Forces model is a framework made by Michael Porter that is used by businesses when thinking about business strategy and the......

Words: 1660 - Pages: 7

Premium Essay

Porter's Generic Strategies

...Porter’s Generic Strategies Porter’s notion on “stuck in the middle” or “hole in the wall” is debatable, it being mutually exclusive. It might be true in some cases but not all the time. Even beyond Porter’s generic strategies, Toyota has been operating and already proven that it’s possible to be a low cost producer of a differentiated product. It was able to achieve leadership in North America, surpassing General Motors. They continuously find ways to reduce production costs and at the same optimize its process so that it could introduce new models faster than its competitors. They’re known for their Toyota Production System (TPS) which other vehicular companies were trying to mimic. This TPS is the main reason why there’s Just-In-Time (JIT) and Lean Manufacturing system in the manufacturing industry today. Toyota used these two manufacturing methods to gain competitive advantage over competitors. In JIT, Toyota build vehicles based on immediate market demands rather than anticipation on future market demands. There’s no overstocking. This strategy results in efficiency and quality. It is mentioned above that cost leadership gains competitive advantage through efficiency while differentiation gains its competitive advantage through quality. This is a proof that cost leadership and differentiation are not mutually exclusive. And so is true with Lean Manufacturing. Its concept is eliminating those processes that will not add value (differentiation) to the product that a......

Words: 659 - Pages: 3

Premium Essay

Management

...ANALYSIS OF MICHAEL PORTER’S GENERIC STRATEGIES AND ITS USAGE IN A GLOBALIZED BUSINESS ENVIRONMENT THESIS - BACHELOR HONOURS IN BUSINESS ADMINISTRATION DIANA MARIA CAMACHO ARIAS TYPE OF DOCUMENT: DISERTATION TO OBTAIN THE DEGREE OF BACHELOR HONOURS IN BUSINESS ADMINISTRATION APPROVED BY UNIVERSIDAD DEL ROSARIO – FACULTAD DE ADMINISTRACION INSTITUTION: ÉCOLE INTERNATIONALE DE MONTPELLIER FRANCE, MONTPELLIER, MAY OF 2009 ANALYSIS OF MICHAEL PORTER’S GENERIC STRATEGIES AND ITS USAGE IN A GLOBALIZED BUSINESS ENVIRONMENT THESIS - BACHELOR HONOURS IN BUSINESS ADMINISTRATION DIANA MARIA CAMACHO ARIAS TYPE OF DOCUMENT: DISERTATION TO OBTAIN THE DEGREE OF BACHELOR HONOURS IN BUSINESS ADMINISTRATION APPROVED BY UNIVERSIDAD DEL ROSARIO – FACULTAD DE ADMINISTRACION TUTOR: TIDIANE AW INSTITUTION: ÉCOLE INTERNATIONALE DE MONTPELLIER FRANCE, MONTPELLIER, MAY OF 2009 DEDICATION I dedicate this dissertation to every person that has allowed it to be possible with the critics, to the teachers and tutors that have awaked in me the interest in this topic and also the passion for the businesses strategy, to my family that has always supported me to achieve my goals and to develop myself as a human being and also as a professional, and finally but not less important to Gabriel that has been a huge support to bring this dissertation to a satisafactory end. ACKNOWLEDGEMENTS This thesis would not have been possible without the generous assistance of the......

Words: 16979 - Pages: 68

Premium Essay

Information Systems

...are successful when they combine the power of the information age with traditional business methods.  True    False   2. Competitive intelligence is information collected from multiple sources such as suppliers, customers, competitors, partners, and industries that analyzes patterns, trends, and relationships for strategic decision making.  True    False   3. The information age is the present time, during which infinite quantities of facts are widely available to anyone who can use a computer.  True    False   4. Technology provides countless business opportunities, but can also lead to pitfalls and traps for a business.  True    False   5. Top managers use social intelligence to define the future of the business, analyzing markets, industries and economies to determine the strategic direction the company must follow to remain unprofitable.  True    False   6. A variable is a business intelligence characteristic that stands for a value that cannot change over time.  True    False 7. Companies update business strategies continuously as internal and external environments change.  True    False   8. For an organization to succeed, every department or functional area must work independently to be most effective.  True    False   9. Porter's Five Forces Model outlines the process for a sales strategy.  True    False   10. With the Five Forces Model, companies should watch the forces in the market. If the forces are......

Words: 28627 - Pages: 115

Premium Essay

Comprtitive Asv

...IDENTIFYING COMPETITIVE ADVANTAGES Video: Panera Bread Cohesion Case: Competitive Advantage:Business Dilemma To survive and thrive, an organization must create a competitive advantage. A  competitive advantage is a product or service that an organization's customers place a greater value on than similar offerings from a competitor. Unfortunately, competitive advantages are typically temporary because competitors often seek ways to duplicate the competitive advantage. In turn, organizations must develop a strategy based on a new competitive advantage. When an organization is the first to market with a competitive advantage, it gains a first-mover advantage. The  first-mover advantage occurs when an organization can significantly impact its market share by being first to market with a competitive advantage. FedEx created a first-mover advantage by creating its customer self-service software, which allows people and organizations to request parcel pickups, print mailing slips, and track parcels online. Other parcel delivery companies quickly began creating their own online services. Today, customer self-service on the Internet is a standard for doing business in the parcel delivery business. Page 14 As organizations develop their competitive advantages, they must pay close attention to their competition through environmental scanning.  Environmental scanning is the acquisition and analysis of events and trends in the environment external to an organization. Information......

Words: 3191 - Pages: 13

Premium Essay

Macro Environment

...2/27/12 Generic Competitive Strategies - eNotes.com Generic Competitive Strategies Generic Competitive Strategies Three of the most widely read books on competitive analysis in the 1980s were Michael Porter's Competitive Strategy, Competitive Advantage, and Competitive Advantage of Nations. In his various books, Porter developed three generic strategies that, he argues, can be used singly or in combination to create a defendable position and to outperform competitors, whether they are within an industry or across nations. Porter states that the strategies are generic because they are applicable to a large variety of situations and contexts. The strategies are (1) overall cost leadership; (2) differentiation; and (3) focus on a particular market niche. The generic strategies provide direction for firms in designing incentive systems, control procedures, and organizational arrangements. Following is a description of this work. OVERALL COST LEADERSHIP STRATEGY Overall cost leadership requires firms to develop policies aimed at becoming and remaining the lowest-cost producer and/or distributor in the industry. Company strategies aimed at controlling costs include construction of efficient-scale facilities, tight control of costs and overhead, avoidance of marginal customer accounts, minimization of operating expenses, reduction of input costs, tight control of labor costs, and lower distribution costs. The low-cost leader gains competitive advantage by......

Words: 3752 - Pages: 16

Premium Essay

Michael Porter Contribution

...Strategy requires an organisation to make trade-offs in competing with other firms by choosing what not to do. The business environment has now become so competitive requiring leaders to develop effective strategies that result in improved competitive. Technology has now made it so easy for competitors to match one’s product within a short space of time. Changes in customer tastes and preferences require robust systems and strategies to maintain current market share profitably and ensure growth. It is within this spectrum that Michael Porter has become a well-known contributor in the field of strategic management as he shades light on which elements to consider in coming up with a strategy for both domestic and international markets. A good strategy will result in the creation of a unique and valuable position, involving a different set of activities. Strategic position emerges from three distinct sources which are serving few needs of many customers, serving broad needs of few customers and serving broad needs of many customers in a narrow market. After positioning itself, an organisation must ensure that its strategic efforts results in creating “fit” among a company’s activities. Fit has to do with the ways a company’s activities interact and reinforce one another. In his endeavour to build strategic intent within organisations, Michael Porter is well known for the following contributions in the field of corporate strategy: 1. Generic Strategies 2. Value Chain ...

Words: 4555 - Pages: 19

Premium Essay

Association with Investment

...A CRITIQUE OF PORTER’S COST LEADERSHIP AND DIFFERENTIATION STRATEGIES Y. Datta Ph.D., State University of New York at Buffalo Professor Emeritus College of Business Northern Kentucky University Highland Heights, KY 41099 (USA) 7539, Tiki Av. Cincinnati, OH 45243 USA Tel: (513) 984-1032 [Home] Fax: (513) 984-1032 E-Mail: datta@nku.edu A paper accepted for presentation at the 9th Oxford Business & Economics Conference to be held in Oxford, England, June 22-24.   Table of Contents A Critique of Porter’s Cost Leadership and Differentiation Strategies 4 ABSTRACT 4 Key Words 4 INTRODUCTION 5 COST LEADERSHIP STRATEGY 5 Major Reliance on Modern Capital Equipment 7 Relying on the Experience Curve to Underprice Competition Risky 7 A Cost Leader Cannot Ignore Differentiation 8 No Such Thing as a "Commodity": Everything Can Be Differentiated 9 High Market Share a Prior Condition for Cost Leadership? 10 Porter Identifies High Market Share with Cost Leadership Strategy 10 Differentiation--Not Cost Leadership Alone--Behind GM’s and Whirlpool’s Success 11 “Low-Cost” or “Low-Price” Strategy? 12 Thompson and Strickland’s Low-cost Provider Strategy 14 Internal Orientation of Cost Leadership Strategy 14 DIFFERENTIATION STRATEGY 15 Superiority of Differentiation over Cost Leadership Strategy 16 Porter: Differentiation and High Market Share Incompatible 17 Differentiation Compatible with High Market Share--and Low......

Words: 10083 - Pages: 41

Premium Essay

Porters Three Generic Strategies

...“Outline Porter’s three generic strategies and discuss whether generic strategies can lead to sustainable competitive advantage” With many views and variations on strategy and a company’s ability to sustain competitive advantage, it seems to be generally acknowledged that Porter’s three generic strategies i.e. Low Cost, Differentiation and Focus strategies, are the most widely accepted. In my following essay I will outline these three generic strategies and discus whether or not generic strategies can lead to sustainable competitive advantage. Cost-leadership strategy, or low cost strategy allows the firm to gain competitive advantage and market share by appealing to cost-conscious consumers. They can either use a no frills approach strategy which combines an inferior product with a low price, or a low-priced strategy where they would produce a product of similar quality but sell it at a lower price. (Johnson et. al, 2009). Pursuing low product cost alone however will not sustain competitive advantage. Managers must attempt to reduce costs in other areas of the firm, such as manufacturing and distribution in order to stay ahead of their competitors. Differentiation strategies involve trying to incorporate unique features to your product or service that will allow consumers to differentiate you from your competitors. This type of strategy can be particularly useful in markets which are saturated or where consumers aren’t particularly price-sensitive. One example of...

Words: 491 - Pages: 2

Premium Essay

A Critique of Porter’s Cost Leadership and Differentiation Strategies

...A CRITIQUE OF PORTER’S COST LEADERSHIP AND DIFFERENTIATION STRATEGIES Y. Datta Ph.D., State University of New York at Buffalo Professor Emeritus College of Business Northern Kentucky University Highland Heights, KY 41099 (USA) 7539, Tiki Av. Cincinnati, OH 45243 USA Tel: (513) 984-1032 [Home] Fax: (513) 984-1032 E-Mail: datta@nku.edu A paper accepted for presentation at the 9th Oxford Business & Economics Conference to be held in Oxford, England, June 22-24. Table of Contents A Critique of Porter’s Cost Leadership and Differentiation Strategies 4 ABSTRACT 4 Key Words 4 INTRODUCTION 5 COST LEADERSHIP STRATEGY 5 Major Reliance on Modern Capital Equipment 7 Relying on the Experience Curve to Underprice Competition Risky 7 A Cost Leader Cannot Ignore Differentiation 8 No Such Thing as a "Commodity": Everything Can Be Differentiated 9 High Market Share a Prior Condition for Cost Leadership? 10 Porter Identifies High Market Share with Cost Leadership Strategy 10 Differentiation--Not Cost Leadership Alone--Behind GM’s and Whirlpool’s Success 11 “Low-Cost” or “Low-Price” Strategy? 12 Thompson and Strickland’s Low-cost Provider Strategy 14 Internal Orientation of Cost Leadership Strategy 14 DIFFERENTIATION STRATEGY 15 Superiority of Differentiation over Cost Leadership Strategy 16 Porter: Differentiation and High Market Share Incompatible 17 Differentiation Compatible with High Market Share--and Low Cost...

Words: 10109 - Pages: 41

Premium Essay

Final Project - Broadway Cafe - Part 1 & 2, Competitive Advantage, Five Force Analysis Etitive Advantage ,

...Introduction………………………………………………………………………………… | 4 | Competitive Advantage…………………………………………………………………….. | 4 | Five Force Analysis………………………………………………………………….. | 5 | Threats of Substitutes Products and Service…………………………………………. | 5 | Buyer Power…………………………………………………………………………. | 6 | Supplier Power………………………………………………………………………. | 7 | Rivalry Among Existing Competitors………………………………………………. | 7 | The Threat of New Entrants………………………………………………………… | 8 | Cost Leadership Generic Strategy…………………………………………………… | 8 | Differential Generic Strategy………………………………………………………… | 9 | Focus Generic Theory……………………………………………………………….. | 9 | Ebusiness……………………………………………………………………………………. | 10 | Conclusion…………………………………………………………………………………... | 11 | References…………………………………………………………………………………… | 12 | Abstract The purpose of this paper is to discuss business decisions and business strategies to gain competitive advantage based on Michael Porter’s Five Force Model and Porter’s Three Generic Strategies. The Five Force Model are buyer power, supplier power, threat of new entrants, threats of substitutes of products and services and rivalry among existing competitors. Further discussion includes determining which Porter’s Three Generic Strategies to use to rebuild a failing eatery located downtown called Broadway Café. The Three Generic Strategies are Cost Leadership Generic Strategy, Differential Generic Strategy and Focus Generic Strategy. I will also discuss how ebusiness can help the......

Words: 2638 - Pages: 11

Premium Essay

The Resesarch Paper of E.Stee Lauder

...Student Name-Tin Thet Thet Han Matrix Number -132015090022 MSU/MBA “Apple Case Assignment” Questions (1)Do you agree or disagree that Apple’s iTunes, iPhone apps, iPad apps give the company a competitive advantage? Be sure to justify your answer. Yes, I agree that Apple’s iTunes, iPhone apps, iPad apps give the company a competitive advantage. Apple let outsiders offer software for the iPhone and in less than 6 months, more than 10,000 applications had been created. Also, more than 15,000 applications are available at its app store section of iTunes, and they have been downloaded a total of 500 million times. Now, many of the iPhone apps are available for the iPad. Moreover, the unique feature of Apple’s competitive advantage is that they come from customers and users, not employees .All of the above data and facts can justify that those apps have a competitive advantage among. (2)Why are data, information, business intelligence, and knowledge important to Apple? Give an Example of each type in relation to the iPad. Through the strategic use of data, information, business intelligence and knowledge , Apple is able to track the use of it and programs to see if they are being accepted and used by many consumers , or don’t attract attention and fail. Another reason that reason that data and information are very important to Apple is that having the ability to show outside accessory and app companies the usage of Apple products in comparison to others .When Apple can......

Words: 1254 - Pages: 6

Premium Essay

The Broadway Cafe

...Broadway Cafe | CIS 500 | Jaya Nanditha, Roslyn Hall, Fardaoussi Mohamed, Francis K. Dunor, | | 2/4/2012 | The purpose of this paper is to discuss business decisions and business strategies to gain competitive advantage based on Michael Porter’s Five Force Model and Porter’s Three Generic Strategies. The Five Force Model is buyer power, supplier power, threat of new entrants, threats of substitutes of products and services and rivalry among existing competitors. Further discussion includes determining which Porter’s Three Generic Strategies to use to rebuild a failing eatery located downtown called Broadway Café. The Three Generic Strategies are Cost Leadership Generic Strategy, Differential Generic Strategy and Focus Generic Strategy. We will also discuss how ebusiness can help the Broadway Café achieve a competitive advantage. Focus of ebusiness will be marketing, finance, accounting, sales, customer service and human resources. Final Project: Broadway Café - Part 1 & 2 | The Broadway Cafe This paper will discuss creating Competitive Advantage in business through business decisions using the Porter’s Five Forces Analysis and Porter’s Three Generic Strategies. In addition, this paper will discuss how ebusiness can be used in making business decisions to gain competitive advantage. A fictitious business, called the Broadway Café will be the model business in which these business practices will be applied. The Broadway Café is a business in the decline......

Words: 2129 - Pages: 9

Premium Essay

Public Health

...outcomes in most instances rely on the possibility of implementing the appropriate business strategy from which a baseline is derived to attain the set goals and objectives through systematic planning, execution, and review. Imperatively, the current world economy is directed by the evolving market dynamics. Currently, Whole Foods Market is regarded as the most prolific and reputable organization in the global industry. For Whole Foods Markets to achieve goals and objectives set by the top management through the implementation of top quality strategies instituted to steer the organization to new heights. However, with many prolific organizations as with Whole Foods Markets, challenges are not unavoidable and quite inevitable. Whole Foods Markets have encountered numerous challenges that have impacted the organization’s ability to achieve its postulated projections as depicted by the current higher rates of competition within the natural food industry, a fledgling economy and the inherent problem of identifying and acquisition of business locations (Thompson, 2012). Consequently, Whole Foods Markets have come up with strategic measures to mitigate challenges that emerge simultaneously with the subsequent changes in the society. As a result, to prevent being a victim to the challenges facing the industry, Whole Foods Markets have decided to focus on the implementation of various strategies involving environmental responsiveness, devotion to the surrounding community......

Words: 2247 - Pages: 9

Premium Essay

Competitive Advantage

...THE CONCEPT OF COMPETITIVE ADVANTAGE IS CENTRAL TO THE STUDY OF STRATEGIC MANAGEMENT, AND EXAMINE THE USE OF PORTER’S GENERIC STRATEGEIS BY COMPANIES TO COMPETE. KEY TERMS Competitive advantage. This is the favourable position an organization seeks in order to be more profitable than its competitors. Strategic management. It is the systematic analysis of the factors associated with customers and competitors (the external environment) and the organization itself (the internal environment) to provide the basis for maintaining optimum management practices. The objective of strategic management is to achieve better alignment of corporate policies and strategic priorities. Porter’s generic strategies. These are three general types of strategies developed by Michael Porter that are commonly used by businesses to achieve and maintain competitive advantage. Company. It is a voluntary association formed and organized to carry on a business. Types of companies include sole proprietorship, partnership, limited liability, corporation, and public limited company. INTRODUCTION The concept of competitive advantage is central to the study of strategic management, since a company or an organization must follow an aligned strategy to outperform their rivals in the industry. Michael Porter introduces three generic strategies that a firm may apply in order to do so they include; overall cost leadership, Differentiation and Focus. In order to create and sustain competitive advantage,......

Words: 3350 - Pages: 14