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Group 8 Assignment 1

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Panashe Doreen Chitsike
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16 views10 pages

Group 8 Assignment 1

Uploaded by

Panashe Doreen Chitsike
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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WITH REFERENCE TO AN ORGANIZATION OF

YOUR CHOICE, EXAMINE HOW PORTER’S


COMPETITIVE ADVANTAGE STRATEGY HAS
BEEN UTILIZED TO ACHIEVE A COMPETITIVE
ADVANTAGE IN THE MARKET.
INTRODUCTION
 According to Porter's Generic Strategies
model, there are three basic strategic options
available to organizations for gaining a
competitive advantage.
 These are: Cost Leadership,

Differentiation and Focus.


1. COST LEADERSHIP

 A company that practices cost leadership strives


to be the lowest-cost manufacturer in its sector.
 A low cost producer must find and exploit all

sources of cost advantage.


 Cost leadership is about achieving scale

economies and utilizing them to produce high


volume at a low cost. Margins may be narrower,
but quantity is larger, enabling high revenue
streams.
 If a company can attain and maintain overall

cost leadership, provided it can command


pricing at or near the industry average, it will
perform above average in its industry.
DISADVANTAGE OF COST LEADERSHIP
 an increase in market size
 a higher chance of survival during downturns

 more capital available for upgrades

 higher profit margins.

 It improves the sustainability of the business

 Reduces Competition
2. DIFFERENTIATION
 Differentiation is creating a unique service or product
offering, either through good branding or strong internal
skills.
 This strategy aims at offering something difficult to copy
and is strongly associated with an organization's brand.
 Differentiation is less tangible and easily defined, yet it
still represents an extremely effective strategy when
properly executed.
 Differentiation refers to a firm's ability to create a good
that is difficult to replicate, thereby fulfilling niche
needs.
 This strategy can include creating a powerful brand
image, which allows the organization to sell its products
or services at a premium.
 The company's margins are high due to the mark-up on
each product (which mostly covers marketing costs, not
production costs).
ADVANTAGES OF DIFFERENTIATION
 Lower Price Competition
 Differentiation strategy allows a company to

compete in the market with something other


than lower prices.
 Unique products.

 Better profit margins.

 Consumer brand loyalty.

 No perceived substitutes.
FOCUS
 The generic strategy of focus rests on the choice of a
narrow competitive scope within an industry.
 The focuser selects a segment or group of segments
in the industry and tailors its strategy to serving
them to the exclusion of others
 The focus strategy has two variants.
 1. Cost focus strategy: This approach utilizes the
basic philosophy of the cost leadership strategy but
with a specific focus on a particular market segment.
 2. Differentiation focus strategy: This approach
offers a specialized product to a specific market
segment rather than the entire field.Cost focus
exploits differences in cost behaviour in some
segments
 while differentiation focus exploits the special needs
of buyers in certain segments.
ADVANTAGES OF FOCUS
 It helps to build strong relationships
within each target market.
 It improves the pricing structure for the

business.
 It brings expertise into the products or

services.
 It allows you to identify your future

customers with specificity.


 It may limit the competition.

 It can improve customer service.

 It can restore the reputation of a brand.

 It typically offers lower production costs.


REFERENCES
 Porter, Michael E., "Competitive Advantage".
1985, Ch. 1, pp 11-15. The Free Press. New
York.

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