GENERIC STRATEGIES

Presented by: Arshad shaikh Tulika Paul

GENERIC STRATEGIES

They outline the three main strategic options open to organization that wish to achieve a sustainable competitive advantage

STRATEGIC ORIENTATION PORTERS THREE GENERIC STRATEGIES

Low Cost Position Overall Cost Leadership Focus Focus Low Cost

Uniqueness Differentiation

Focus Differentiation

Strategic Advantages

COST LEADERSHIP.
The low cost leader in any market gains competitive advantage from being able to produce at the lowest cost. Cost is driven down through all the elements of the value chain. However, low cost does not always lead to low price. Producers could price at competitive parity, exploiting the benefits of a bigger margin than competitors. Toyota, is very good not only at producing high quality autos at a low price, but have the brand and marketing skills to use a premium pricing policy. Wal-Mart is another example of low-cost strategy.

THE SOURCES

OF

COST ADVANTAGES

Economies of Scale Experience or learning-curve Capacity Utilization Product Design Location Vertical Integration/Outsourcing Value chain configuration

DIFFERENTIATION
Differentiation means providing something unique that is valuable to the buyer beyond simply offering a low price. (M. Porter)

Differentiated goods and services satisfy the needs of customers through a sustainable competitive advantage. This allows companies to desensitize prices and focus on value that generates a comparatively higher price and a better margin.

KEYS TO SUCCESSFUL DIFFERENTIATION

Understanding customer needs and preferences

Commitment to customers Knowledge of company's capabilities Innovation

The Nature of Differentiation

THE KEY IS CREATING VALUE FOR THE CUSTOMER
TANGIBLE Observable characteristics: size, color, materials, etc. performance packaging complementary services

INTANGIBLE Unobservable and subjective characteristics relating to image status, exclusively, identity.

TOTAL CUSTOMER RESPONSIVENESS: Differentiation not just about the product, it embraces the whole relationship between the supplier and the customer.

NICHE/ FOCUS STRATEGIES

Here the organisation focuses its effort on one particular segment and becomes well known for providing products/services within the segment. They form a competitive advantage for this niche market and either succeed by being a low cost producer or differentiator within that particular segment. Examples include Roll Royce, Bentley or Organic food.