PORTER’S GENERIC COMPETITIVE

STRATEGIES
• Porter suggests it is important for an organization to have an appropriate competitive strategy. But,
what is appropriate?
• Porter suggests it is based on an organization’s competitive advantage that comes from one of two sources:
having the lower costs in the industry or possessing significant and desirable differences from competitors.
Another strategic factor is the scope of the product market in which the organization wishes to compete.

The mix of these factors provides the basis for his generic competitive strategies
• Cost leadership
• Differentiation
• Focus (niche)
PORTER’S GENERIC COMPETITIVE
STRATEGIES – CONT’D
• Cost leadership strategy
• Is low cost strategy, it is when a company strives to have the lowest costs in the industry and
produces products for a broad customer base
• The main goal is to have the lowest costs, not necessarily the lowest prices; so the effort is to
have the lowest total unit costs in the industry
• Because the cost leader seeks to keep costs low, efficiency in all areas is critical and resources,
distinctive capabilities, and functional strategies are directed at that effort
PORTER’S GENERIC COMPETITIVE
STRATEGIES – CONT’D
• Differentiation Strategy
• This is when a company competes by providing unique (different) products with features the
customers value as different and are willing to pay a premium price for them
• The main goal of the differentiator is to compete by providing goods or services that are truly
unique and different in the eyes of the customers. If successful, the firm can charge a premium
price
PORTER’S GENERIC COMPETITIVE
STRATEGIES – CONT’D
• Differentiation Strategy (cont’d)
• The premium price provides the profit incentive to compete on the basis of differentiation
• To differentiate successfully, all capabilities, resources, and functional strategies must be
aimed at isolating and understanding market segments and developing product features that are
valued by customers in those segments
PORTER’S GENERIC COMPETITIVE
STRATEGIES – CONT’D
• Differentiation Strategy (cont’d)
• This strategy seeks to differentiate in as many market segments as possible
• It also focuses on brand loyalty, which creates repeat purchases
• Marketing and R&D are essential to this strategy, requiring resources and distinctive
capabilities
PORTER’S GENERIC COMPETITIVE
STRATEGIES – CONT’D
• Focus Strategy
• Involves the application of a cost or differentiation strategy within a limited/narrow group or
segment
• A focuser concentrates on serving a specific market niche
• A Market niche can be segmented geographically, by type of customer, or product line
PORTER’S GENERIC COMPETITIVE
STRATEGIES – CONT’D
• Focus Strategy (cont’d)
• A cost focuser competes on having lower costs than the overall industry cost leader, but only
in specific and narrow niches
• Cost focus can be successful if an organization can produce complex or custom built products
that do not lend themselves to easy imitation by the industry’s overall cost leaders
PORTER’S GENERIC COMPETITIVE
STRATEGIES – CONT’D
• Focus Strategy (cont’d)
• A differentiation focuser can use whatever forms of differentiation they wish – product
features, innovations, quality, customer responsiveness
• The differentiation focuser is specializing in one or few segments, rather than in all market
segments