The model of Generic Competitive Strategies given by Michael Porter is also known as Generic Business Strategies. This model mainly focus on two approaches – 1. Lower Cost and 2. Differentiation. Porter’s Generic Competitive Strategies also focus on dependence of business on the industry structure and the positioning of the firm in the industry. Here we can explain this model with the help of positioning and its relation with factors given by Porter.
Generic Competitive Strategies
This Model is given by Michael Porter
This model mainly concentrates on various competitive strategies.
It also correlates relation of dependency of business on positioning two related factors-
1. Competitive Advantage and
2. Competitive Scope
Competitive advantage is derived from two approaches
1. Lower Cost and
Below we have given diagram of Porter’s Generic Competitive Strategies Model –
This Matrix is suggested by Michael Porter to describe three types of competitive or business strategies.
1. Cost Leadership (lower cost/broad target)
2. Differentiation (Differentiation/broad target)
3. Focus (Lower cost or differentiation/ narrow target)
We can describe these three types with examples which are given as below.
1. Cost Leadership Business Strategy
“Cost leadership is the competitive advantage of an organization lies in its lower cost of products or services relative to what the competitors have to offer.”
Lower cost of products or services can be a competitive advantage for an organization
If the company offers similar utility comparable to the market, customers can prefer these low cost products.
1. Moser Baer India
Noida UP based world class mfg. company
Well known for CD’s
Among top three global companies for data storage business
2. GCMMF – Gujarat Cooperative Milk Marketing Federation – Brand Amul – Ice Cream market
3. Tata Steel
4. Reliance Communication (Entry Level)
6. Tata Docomo (Entry Level)
Achieving Cost Leadership
1. Accurate demand forecasting
2. Optimum Utilization of resources
3. Economies of scale
4. High level product standardization/ Mass level production – leads to lower cost per unit
5. Target average customers by offering general set of utilities
6. Cost saving technologies
Conditions to use cost leadership strategy
1. Price based competition (Cost is an important factor)
2. Standardized products/services where differentiation has less important
3. Large number of buyers and bargaining with suppliers is possible
4. Less customer loyalty
5. Easy to switch from one product to another (or one service to another) – this is for customers
6. Differentiation less matters
2. Differentiation Business Strategy
If customers demand something special and innovative and they are willing to pay for it, company can adopt differentiation strategy.
Company can perform very well by offering special features, innovative products and can make differentiation from its competitors to get competitive advantage.
A differentiated product or service stands apart in the market and is distinguishable by customers due to its attractive and special features.
– A differentiated product
– Special/additional features
– stands apart in the market & attracts customers
– Premium pricing strategy can be adopted
– over-performs its competitors
– Orient Fans: Kolkata based C K Birls organization, premium price, xports to many stores including Walmart, technology differentiation- Air delivery, reach of air and electricity consumption
– Gati – A multinational transport company, technology driven company, delivering premium value to the customers
Differentiation- risk insurance for shipments, refund on failure to deliver on time, door to door pick up and delivery, time bound operations, online tracking and safer transportation
– Parle Agro -frooti – packaging