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Porter's Generic Strategies with examples
 

Porter's Generic Strategies with examples

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This Presentation is containing brief description of generic strategies with examples of companies in detail....

This Presentation is containing brief description of generic strategies with examples of companies in detail....
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    Porter's Generic Strategies with examples Porter's Generic Strategies with examples Presentation Transcript

    • PORTER’S GENERIC STRATEGIES
    • Introduction… Michael Porter is a professor at Harward Business School. A firm’s success in strategy rests upon how it positions itself in respect to its environment. Michael Porter has argued that a firms strengths ultimately fall into one of two headings: cost advantage and differentiation. By applying these strengths in either a broad or narrow scope, three generic strategies result:, cost leadership differentiation, and focus
    • Generic Strategies Cost Leadership Differentiation Focus• Superior profits through lower • Creating a • Concentrating on costs. product or service a limited part of that is perceived the market.• E.g. : WalMart, as being unique Tesco “throughout the • E.g. : PepsiCo industry” • E.g. : Mcdonald, FedEx
    • Porter’s Generic Strategy… Advantage Advantage Target Scope (Low Cost) (Product Uniqueness) Broad Cost Leadership Differentiation (Industry wide) Narrow Focus Strategy Focus Strategy (Market wide) (low cost) (differentiation)
    • Cost Leadership Strategy Aiming to become Lowest Cost Producer The firm can compete on the price with every other industries and earn higher unit profits. Cost reduction provides the focus of the organisation’s strategy. Targets a broad market. Competitive advantage is achieved by driving down costs. A successful cost leadership strategy requires that the firm is the cost leader and is unchallenged in this position. Especially beneficial : where customers are price sensitive
    • (Walmart logo, used from June 30, 2008-present.)Type : PublicIndustry : RetailingFounded : 1962Founder(s) : Sam WaltonHeadquarters : Bentonville, Arkansas,USNumber of locations : 8,970 (2011)Area served : WorldwideKey people : Mike Duke(CEO) H. Lee Scott(Chairman) S. Robson Walton (Chairman)Employees : Approx. 2.1 million (2011)Subsidiaries : Walmex Asda Sams Club Seiyu Group
    •  The central goal of Wal-Mart is to keep retail prices low -- and the company has been very successful at this. Experts estimate that Wal-Mart saves shoppers at least 15 percent on a typical cart of groceries. Wal-Mart Stores Inc. is rolling out its "everyday low prices" (EDLP) retail strategy to more international markets to replace the more usual high-low pricing in emerging markets. EDLP means working with suppliers to ensure their prices are constantly low, but also means price changes are kept to a minimum. Wal-Mart also employs a good structure that works with the systems to empower the low price strategy. Wal-Mart has in place a set of systems that helps it achieve its strategy of low prices everyday.
    • Success Mantra… Access to the capital required to make a significant investment in production assets. Design skills for efficient manufacturing High level of expertise in manufacturing process engineering. Efficient distribution channels.
    • Risks Involved.. Other firms may be able to lower their costs as well. As technology improves, the competition may be able to leapfrog the production capabilities, thus eliminating the competitive advantage. It could lead to a damaging price wars. There might be difficulty in sustaining cost leadership in the long run. A firm following a focus strategy might be able to achieve even lower cost within their segment.
    • Differentiation Strategy A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers. Customers perceive the product to be different and better than that of rivals. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. Differentiation can be based on product image or durability,after-sales,quality,additional features. It requires flair,research capability and strong marketing.
    • Type : PublicIndustry : RestaurantsFounded : McDonald’s Corporation ~ May 15, 1940 in San Bernardino, California ~ April 15, 1955 in Des Plaines, IllinoisFounder(s) : Richard and Maurice McDonald,( McDonald’s restaurant concept ) Ray Kroc,( McDonald’s Corporation founder )Headquarters : Oak Brook,Illinois,USArea served : WorldwideKey people : James A. Skinner (Chairman & CEO)
    • Number of locations : 32,000 Employees : 4,00,000 ( 2010) Products : Fast Food ( hamburgers , chicken , french fries , soft drinks , coffee , milkshakes, salads, desserts , breakfast )  McDonalds customers are of all classes, but largely working and middle classes, and people of all ages.  McDonald’s strove to meet a customer wait time at no more than one minute in line and 30 seconds at the counter.
    •  McDonalds understood that the parent was making the purchasing decision, most likely based solely on price. What McDonalds marketing executives did was ingenious. They put a $.50 toy in with the hamburger, french fries, and Coke. Then they gave it a special name, calling it a Happy Meal. Then they marketed it to the kids. McDonalds knows that some customers go to its stores to take a quick break from their days activities and not because McDonalds was able to make their food ten seconds faster than a competitor. So McDonalds marketing executives then put together the phrase, “Have you had your break today?” Theyve taken competing on price right out of the picture,” says Greshes. “They bring you quality, convenience, service, and value — and they make you feel like you are getting a break in your hectic day.
    • Success Mantra… Access to leading scientific research. Highly skilled and creative product development team. Strong sales team with the ability to successfully communicate the perceived strengths of the product. Corporate reputation for quality and innovation.
    • Risks Involved… Involves higher costs. Customers might become price sensitive and choose on price rather than uniqueness. Customers may no longer need the differentiation factor. Imitation by competitors and changes in customer tastes. Rivals pursuing a focus strategy may be able to achieve even greater differentiation in their market segments.
    • Focus Strategy The focus strategy concentrates on a narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. The premise is that the needs of the group can be better serviced by focusing entirely on it. A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly. Because of their narrow market focus, firms pursuing a focus strategy have lower volumes and therefore less bargaining power with their suppliers However, firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitute products do not exist.
    • Type : PublicIndustry : Food and BeveragesFounded : North Carolina,U.S.(1986)Founder(s) : Donald Kendall,Herman LayHeadquarters : Purchase,New York,USArea served : WorldwideKey people : Indra Nooyi (Chairman & CEO)Employees : 2,94,000 (2010)Divisions : PepsiCo Americas Foods; PepsiCo Americas Beverages; PepsiCo Europe; PepsiCo Asia, Middle East & AfricaSubsidiaries : Products, Trademarks ~ Frito-Lay ~ Quaker Oats ~ Tropicana
    •  By successfully adopting the focus strategy since 1997, PepsiCo has emerged as the second largest consumer packaged goods company. The company has significantly strengthened its competitive position in the beverages segment. By acquiring leading beverages company like Tropicana products (July 1998), South Beach Beverage Company (October 2000) and Quaker Oats (December 2000)
    • Success Mantra… Lower investment in resources. The firm benefits from specialisation. Provides scope for greater knowledge of a segment of the market. Makes entry to new markets easier and less costly. Firms using a focus strategy often enjoy a high degree of customer loyalty.
    • Risk Involved… Limited opportunities for growth. The firm could outgrow the market. Danger of decline in the chosen segment or niche. Risk of imitation. Risk of changes in the target segment. A reputation for specialisation inhibits move into new sector.
    • We have Learnt… Cost Leadership - Being the lowest cost producer in the industry as a whole Differentiation - The exploitation of a product or service which is believed to be unique Focus - Restricting activities to only part of the market through: - Providing goods or services at lower cost to that segment (cost focus) - Providing a differentiated product or service to that segment (differentiation focus)
    • prepared by………….. DiPALi