Porter’s Generic Strategies (Strategic Management )

Porter’s generic strategies refers to how a company can try to get a competitive advantage in its chosen market. There are different generic strategies with emphasis on either lower cost, differentiation, or focus.

Michael Porter is an American academic known for his popular theories on economics, and business strategies.

Porter refers to the generic strategies as:

• Cost Leadership” (no frills, keep cost down as much as possible). A company either chooses to lower the price of its products to beat the competitors.
• “Differentiation” (creating unique products and services). A company might choose product differentiation based on the factors valued by customers to command a higher price.
• “Focus” (focus in a niche market). At times, a company may choose the “focus” strategy by concentrating on a small segment of the market to satisfy the segment’s unique needs or demand (also known as niche marketing). This part is further divided into two parts: “Cost Focus” and “Differentiation Focus.”

Basically, what Porter says is that a company’s business-level strategy should not involve trying to serve the varied needs of the marketplace at one go. Instead, choosing to specialize or focus on certain aspects can be advantageous.

Can be used by any Company
Michael Porter refers to these approaches in his generic strategies. These approaches are called “generic strategies” because they can be applied to products or services in any industries, and organization of any size.
Michael Porter’s generic strategies could be used by a company of any size (small, medium or big) to pursue its competitive advantage. These strategies are lowering the cost of product, product differentiation, and focus on the niche market.

A company either chooses to lower the price of its products to beat the competitors, or chooses product differentiation to command a higher price; sometimes, it chooses the focus strategy by concentrating on a small segment of the market to satisfy the segment’s unique needs or demand. Implementing one of the generic strategies successfully gives advantage to an organisation in the market.

• Comparative Advantage: When a company has a comparative advantage, it is able to create products more efficiently than its competitors, which leads to better profit margins; because most buyers would naturally opt for cheaper products from all the options available.
• Differential Advantage: When a company builds differential advantage over the competitors, the company’s products or services are seen as of higher quality, which the company capitalizes on. It promotes the products saying that it is of superior quality, and may even charge a premium. Advanced technology, strong brand identity, patent-protected products or processes, usually offer differential advantage.

MBA (management) assignment question / case study on Porter’s Generic Strategies.

Q) You have been appointed as a Strategy Consultant to a Swiss luxury watch brand wanting to enter India. Which one of Porter’s Generic Strategies would you choose to be operational in India & explain the reasons in detail behind your choice of strategy? Once the strategy has been chosen, explain the categories of customers you would target?

Q) You have been appointed as a Strategy Consultant to the Burj Al Arab brand wanting to enter India. Which one of Porter’s Generic Strategies would you choose to be operational in India & explain the reasons in detail behind your choice of strategy? Once the strategy has been chosen, explain the categories of customers you would target?

Q) Michael Porter in 1985 in his book, “Competitive Advantage: Creating and Sustaining Superior Performance” proposed three generic strategies of cost leadership, differentiation, and focus. Select any Indian company and explain how it has implemented the Porter’s generic strategies.

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