Porter’s Generic Strategies

Porter identified 4 generic strategies that can be used to both classify company behaviour and drive
company behaviour. And also to gain competive advantage

Cost Leadership Strategy

Cost Leadership Strategy is where a business focuses on reducing the cost to deliver the products or
services to a customer, ensuring you’re more profitable and thus can add shareholder value or invest in
other parts of the business.

Cost Leadership Strategy need to 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

Cost Leadership Strategy opens up several options to companies:

• 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

Differentiation Strategy
Differentiation Strategy is where a business focuses on differentiating their products or services from
competitors. This strategy has a wide range from full product diversity through to unique features within
a core product.

When applying Differentiation Strategy we need to review:

• Your current product or service portfolio

• Your competitors and their portfolio

• Trends within customer feedback

• Current resources and effort to innovation

Differentiation Strategy opens up several options to companies:

Enter new markets to diversify revenue

Grow existing revenue by price increases

Opening up marketing channels with news about features or products

Cost Focus Strategy

Cost Focus Strategy is an evolution of the Cost Leadership Strategy. As the name suggests, there are two
aspects to this 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

benefits of Cost Leadership while also providing additional options:

• 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

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 highlights
the fact the business is entering a niche marketplace.

strategy has all the benefits of Differentiate while also providing additional options:

• Cross-selling between customers within markets

• Changing the market or customers by replacing products

• Innovating additional services to sell as additional products

Differentiate Focus is hard in a mature marketplace – investigate competitor products and customer
feedback before deciding on this approach.

Operational excellence

Operational Excellence is the execution of the business strategy more consistently and reliably than the
competition, with lower operational risk, lower operating costs, and increased revenues relative to its
competitor.