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SM Assignment Unit-3 Pankaj Surkule 35 (A)

Michael Porter identified four generic strategies that companies can use to gain competitive advantage: cost leadership, differentiation, cost focus, and differentiation focus. Cost leadership involves having the lowest costs in the industry. Differentiation means making products or services unique. Cost focus and differentiation focus are variations where a company targets a niche market segment by having the lowest costs or most differentiated products for that segment. The strategies involve analyzing factors like costs, innovation, customer needs, and resources to determine the best approach.

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41 views21 pages

SM Assignment Unit-3 Pankaj Surkule 35 (A)

Michael Porter identified four generic strategies that companies can use to gain competitive advantage: cost leadership, differentiation, cost focus, and differentiation focus. Cost leadership involves having the lowest costs in the industry. Differentiation means making products or services unique. Cost focus and differentiation focus are variations where a company targets a niche market segment by having the lowest costs or most differentiated products for that segment. The strategies involve analyzing factors like costs, innovation, customer needs, and resources to determine the best approach.

Uploaded by

Sanjay Kale
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Porter Generic Strategy

Name:- Pankaj Sakharam Surkule.


Sub.:- Strategic Management
Class:- M.Com (F.Y.) ‘A’
Roll No. :- 35
Introduction
• Michael Porter is a professor at Harward Business School.
• A firm's success in strategy rests upon how it positions itself in
respect to its environment.
• Michael Porter has argued that a firm's strengthsultimately fall
into one of two headings: cost advantage and differentiation.
Concept

• Porter identified 4 generic strategies that can be used to both


classify company behaviour and drive company behaviour.
• They’re all around gaining a competitive advantage. So, if you’re
currently looking at your strategy then reminding yourself of the
generic strategies can be very useful if you want to achieve
market share growth.
• By applying these strengths in either a broad or narrow scope,
generic strategies result:, Cost leadership Differentiation, and
Focus (Cost Focus and Differentiation Focus).
Markets where business competes
The four strategies are called:

• Cost Leadership Strategy


• Differentiation Strategy
• Cost Focus Strategy
• Differentiation Focus Strategy
Cost Leadership Strategy

The Cost Leadership Strategy is where a business focuses on


reducing the cost to deliver the products or services to a customer.
This ensures you’re more profitable and thus can add shareholder
value or invest in other parts of the business strategy.
Factors To Consider

• What impact will the drive down on costs have to your customers and
employees?
• Is it maintainable as you scale?
• How will you reinvest the additional profits of the business?
• How will you produce the lowest cost delivery vs your competitors?
• Will any of the saving be passed on to customers?
• Can you maintain your position as the lowest cost, or will competitors
catch up?
Analysis should review

• Your current suppliers and their costs


• Technology and innovations that can reduce your processes
• Process speed and efficiency
• Your people cost and their progression
• Your management team skills – detail, process driven, analytical and
financial are required attributes of the team
Features-

• Increasing your profit margins by maintaining your current cost


• Resisting price increases when competitors are forced to do so
• Reducing the price to become more competitive
• Investing the profits into diversifying your business, automation for
further cost reduction, or shareholder value
• For i.e. McDonald’s
Differentiation Strategy

The Differentiation Strategy is where a business focuses on


differentiating its products or services from competitors. This
focused strategy has a wide spectrum from full product diversity to
unique features within a core product.
Factors To Consider

• How mature is the market your product or service operates in?


• What is the history of competitor innovation?
• What does your customer feedback suggest?
• Is your company setup to take advantage of new features with strong
marketing?
• Why do you currently win or lose sales deals?
• Your management team skills – creativity, outward thinking, market
expertise are required attributes.
Analysis should review

• Your current product or service portfolio


• Your competitors and their portfolio
• Trends within customer feedback
• Current resources and effort to innovation
• Cost of resource
• Any M&A activity observed within the market including if there is an
opportunity for you
• Map youd 4Ps against your current setup.
Features-

• Enter new markets to diversify revenue


• Grow existing revenue streams with upsells or by winning more deals
• Grow existing revenue by price increases
• Opening up marketing channels with news about features or products
• Building a community within your customer base around new features
• Increasing loyalty of customers by delighting them
• For i.e. Apple, Starbucks.
Cost Focus Strategy

The Cost Focus Strategy is an evolution of the Cost Leadership


Strategy.
As the name suggests, there are two aspects to this business
strategy. The “Focus” refers to when a company focuses on a niche
market, either by industry or geography, and becomes the expert in
delivering for that industry. The “Cost” refers to the company producing
the product or service for an aggressive cost to them, much like the Cost
Leadership Strategy we discussed earlier.
Factors To Consider

How big is the niche market you’re operating in or working towards?


Can you provide the product or service at a cheaper cost than the
competition?
Can you maintain the quality required to be leader in the niche
market?
• What is the level of cost per customer to become the leader
within this market?
Benefits Of Cost Focus Strategy

Becoming thought leaders within an industry


Opening up partnerships with other companies in the same industry
Providing a level of credibility to your overall company story
• Generate customer loyalty by becoming the single trusted provider
in the industry
Differentiation Focus Strategy

The Differentiation Focus Strategy is an evolution of the


Differentiation Strategy. As with Cost Focus, there are two aspects –
one focusing on the Differentiation aspect of the strategy while the
other highlighting the fact the business is entering a niche
marketplace.
Factors To Consider

How big is the niche market you’re operating in or working towards?


Does the market lend itself to differentiation?
What is the size of the market vs the investment required to
differentiate?
• What new features or products will make you successful?
Benefits Of Differentiation Focus Strategy

Cross-selling between customers within markets


Changing the market or customers by replacing products
• Innovating additional services to sell as auxiliary products
We have learnt...

• Cost Leadership
-Being the lowest cost producer in the industry as a whole
• Differentiation
-The exploitation of a product or service which isbelieved to be unique
• Focus
- Restricting activities to only part of the market through:
- Providing goods or services at lower cost to that segment (cost focus)

- Providing a differentiated product or service to that segment


(differentiation focus)
Thank You
Academic Year
2022-23

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