GENERIC COMPETITIVE
STRATEGIES
COST, LEADERSHIP, DIFFERENTIATION &
FOCUS
MMM SEM V
Michael E. Porter
“Father Of The Modern Strategy Field”
Michael E. Porter is a
leading authority on
competitive strategy; the
competitiveness and
economic development of
nations.
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GENERIC COMPETITIVE STRATEGIES
Cost Leadership
Cost Focus
Differentiation Leadership
Differentiation Focus
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Scope of Business Products
Cost
Narrow
Cost
Leadership
Differentiation
Source of Competitive Advantage
Broad
Differentiation
Leadership
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Cost Focus
Differentiation
Focus
COST LEADERSHIP
• It describes a way to establish the competitive
• Cost leadership, in basic words, means the
operation in the industry.
•
•
advantage.
lowest cost of
company efficiency, size,
scale, scope and cumulative experience (learning curve).
A cost leadership strategy aims to exploit scale of production,
The cost leadership is often driven by
well defined scope and other economies
Eg. producing highly standardized products, using high technology.
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Examples….
Video
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Scope of Business Products
Narrow
Cost
Cost
Focus
Cost
Leadership
Differentiation
Source of Competitive Advantage
Broad
Differentiation
Leadership
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Differentiation
Focus
COST FOCUS
• Cost focus exploits
differences in cost behaviour
in segments
• The firm can choose to
compete in a defined,
focused market segment with
a narrow scope
• In adopting a narrow focus, the
company ideally focuses on a
few target markets
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WHAT MAKES A SEGMENT ATTRACTIVE FOR
FOCUSING?
Points to remember……
• Size of the segment is big enough to be profitable
•
Size of the segment is small
enough to be of secondary interest
to large rivals
• Has good growth potential
• Less vulnerable to substitutes
• Not crucial to the success of major competitors
• Buyers in the segment require specialized expertise OR
customized product attributes
• No other rivals are concentrating on the segment
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Example….
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Scope of Business Products
Cost
Narrow
Cost
Leadership
Differentiation
Source of Competitive Advantage
Broad
Differentiation
Leadership
Cost Focus
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Differentiation
Focus
DIFFERENTIATION LEADERSHIP
• Customers perceive the product to be different and
better than that of rivals
• A differentiation strategy calls for the development of
a product or service that offers unique attributes that
are valued by customers.
• Approaches to differentiation include
developing UNIQUE brand images,
technology, features, channels, and customer
service
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Examples….
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Examples….
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Scope of Business Products
Cost
Narrow
Cost
Leadership
Cost Focus
Differentiation
Source of Competitive Advantage
Broad
Differentiation
Leadership
Differentiation
Focus
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DIFFERENTIATION FOCUS
• Firms that are successful in a focus strategy
are able to tailor a broad range of product
development strengths to a relatively narrow
geographic market segment, or to a particular
buyer group or segment
• Also target market segments that are less
vulnerable to substitutes.
• Also called a segmentation strategy or niche
strategy
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Examples….
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Scope of Business Products
Cost
Narrow
Cost
Leadership
Cost Focus
Cost
Leadership
Differentiation
Source of Competitive Advantage
Broad
Differentiation
Leadership
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Differentiation
Focus
BEST COST PROVIDER STRATEGY
• Low cost, differentiation markets (a hybrid)
• Broad markets and market niches (middle ground)
• Value conscious buyers
• Those who shy away from cheap, low-end
products and expensive high-end products
• Willing to pay a fair price for functionality and
performance
• More for the money
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BEST COST PROVIDER STRATEGY
‣ Positioning near the middle of the market
‣ Combines other basic strategies
‣ Medium quality at below average price, or
‣ Somewhat higher quality at an average or slightly
higher price
‣ Adjust strategy for economic conditions, i.e. more
value conscious
‣ Match strategy to internal resources and
capabilities
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Examples….
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• http://www.youtube.com/watch?v=UA3C0SKbEs
• http://www.youtube.com/watch?v=6kgMMgq
LL24
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