Porter's Generic Strategies focus on cost leadership, differentiation and focus strategies.

1. PORTER’S GENERIC STRATEGIES
COST LEADERSHIP, DIFFERENTIATION & FOCUS STRATEGY
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2. PORTER’S GENERIC STRATEGIES
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• Porter’s generic strategies were first set out by Michael Porter in 1985 in his book,
"Competitive Advantage: Creating and Sustaining Superior Performance.”
• Porter’s generic strategies are ways to gain competitive advantage over the competitors.
• A competitive advantage is an upper edge over competitors exercised by offering consumers
greater value, either by serving with lower prices or by providing greater benefits and service
that justifies provided prices.
• These strategies can be applied to products or services in all industries and to all organizations
of all sizes.
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COST LEADERSHIP DIFFERENTIATION
COST FOCUS DIFFERENTIATION FOCUS
COST DIFFERENTIATION
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4. COST LEADERSHIP
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Aiming to become the lowest cost provider.
The company works towards reducing the cost of not just one product, but the entire
range of products in the company’s portfolio.
There are two main ways of achieving this within a Cost Leadership strategy:
● Increasing profits by reducing costs, while charging industry-average prices.
● Increasing market share by charging lower prices, while still making a reasonable
profit on each sale because you’ve reduced costs.
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5. SUCCESS MANTRA: COST LEADERSHIP
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Access to the capital needed to invest in technology
that will bring costs down.
Very efficient logistics.
A low-cost base (labor, materials, facilities) and a way
of sustainably cutting costs below those of other
competitors.
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6. RISK INVOLVED: COST LEADERSHIP
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❏ Other firms may be able to lower their costs as well.
❏ As technology improves the competition may be able to leapfrog
the production capabilities, thus eliminating the competitive
advantage.
❏ This is why it's important to continuously find ways of reducing
every cost. One successful way of doing this is by "continuous
improvement."
❏ It could lead to a damaging price wars
❏ There might be difficulty in sustaining cost leadership in the
long run
❏ A firm following a focus strategies might be able to achieve even
lower cost within their segment.
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7. COST LEADERSHIP
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8. DIFFERENTIATION STRATEGY
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❏ The strategy calls for the development of products or services that offers
unique attributes that are valued by the customers
❏ Differentiation is about charging a premium price that more than covers the
additional production costs, and about giving customers clear reasons to
prefer the product over other, less differentiated products.
❏ This strategies focuses on development of a product or service, that is unique
for the customers, in terms of product design features, brand, image, quality
or customer service.
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9. DIFFERENTIATION STRATEGY
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10. SUCCESS MANTRA: DIFFERENTIATION STRATEGY
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To make a success of a Differentiation strategy,
organizations need:
Good research, development and innovation.
The ability to deliver high-quality products or
services.
Effective sales and marketing, so that the market
understands the benefits offered by the
differentiated offerings.
Corporate reputation for quality and innovation
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11. RISK INVOLVED: DIFFERENTIATION STRATEGY
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Involves Higher Costs
Imitation by competitors and changes in
customer preferences
Rivals Pursuing a focus strategy may be able
to achieve even greater differentiation in the
market segments
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12. FOCUS STRATEGY
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❏ Companies that use Focus strategies concentrate on particular niche markets and, by
understanding the dynamics of that market and the unique needs of customers within
it, develop uniquely low-cost or well-specified products for the market.
❏ Because they serve customers in their market uniquely well, they tend to build strong
brand loyalty amongst their customers.
❏ Firms pursuing focus strategies have lower volume and therefore less bargaining power
with their suppliers
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13. FOCUS STRATEGIES
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14. SUCCESS MANTRA: FOCUS STRATEGY
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Lower investment in resources
Firm benefits from specialization
Provides scope for greater knowledge of the
market
Makes entry to new market easier and less costly
High degree of customer loyalty
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15. RISK INVOLVED: FOCUS STRATEGY
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Limited opportunities for growth
Danger in decline of the target segment
Risk of imitation
A reputation for specialization inhibits move into
new sector
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16. THANK YOU!
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