Porter’s Generic Strategies
A generic strategy is one that can be applied to many ____________ from coal to
computers and can be pursued by any type or size of organization, profit making or
not – that is, it applies to ____ businesses. Porter identified 3 generic strategies
including _______________, _____________ and __________ strategy.
Figure: Porter’s generic strategies
However, the combination of these strategies results in four possible approaches as
the focus strategy can be subdivided into a ____ or ______________ approach.
Firms can use these general or broad strategies to sustain a _______ advantage:
1. Cost leadership means to become the ______ cost supplier of a product within the
market. For example,
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
_________________________________________________________________
2. Differentiation happens when a firm makes its mass-market products distinct from
those of its __________. This could be done through various methods such as
packaging or branding to make the product seem unique. The focus here is on
______ rather than the cost of the product. Successful differentiation will allow a
business to charge a ________ price thereby earning a higher profit ______ for
the firm. For example
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
One drawback of this method is that it may be ________, such as the amount of
money needed to successfully develop and promote a product.
3. Focus occurs when a firm targets a niche or singe segment of the market. In the
case of _____________________________________, focus can be a highly
profitable strategy due to the high prices that can be charged and the lack of
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competition. However, focus can also be used by low-cost businesses that cater
for a certain market segment, such as discount bric-a-brac stores. The drawback of
focus as a strategy is that the market size is very __________.
His generic strategies help businesses to determine their ______ strategy. He
suggested that any mass market business can choose from ___________ or
________________(via differentiation). The third option he suggested was for
businesses to focus on niche markets. Any of these strategies can help a business to
gain a competitive ________ to maintain market ______ and ______.
Porter suggests that it is not possible in the long term to adopt a mixture of these
strategies. For example, it is not feasible to maintain ______ quality by using a cost
leadership strategy i.e firms cannot expect to be highly profitable & to have an image
of outstanding quality by charging ____ prices. Hence, Porter’s ideas help managers
to concentrate on a specific strategy that serves their organizations.
The industry’s character determines the range of effective strategies. In a commodity
market where only costs matter – differentiation is impossible as there is no
__________. In economic terms, this is called _________________________ .
High-fashion markets, on the other hand, are driven solely by _________. Price is
rarely the deciding factor in a customer’s purchasing decision.
Porter emphasized the need for businesses to focus on ______ cost or differentiation,
or risk getting ‘________________________’, where competitors surpass them both
on cost and superior product offerings. In other words, companies cannot afford to
compete with everyone. If customers perceive a company as offering high-quality
products such as in fashion markets, reducing price to compete with ‘bargain
basement’ businesses will cause confusion for customers, who will probably lose trust
in the quality and exclusivity of the products on offer. However, this is not a view held
by all strategists. Some argue that there is a viable ‘middle ground’ between strategies.
Research on Harrods and KFC and refer to the Les Maisonettes case study, identify
and explain which of Porter’s generic strategies are used.
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