Porter: Generic  Strategies
The marketing strategy challenge To find a way of achieving a To find a way of achieving a   sustainable competitive   sus...
What is a competitive advantage?  An advantage over competitors  An advantage over competitors   gained by offering consum...
Porter’s Generic Strategies
Introducing Porter’s approach• Porter suggested four "generic" business  strategies that could be followed in order  to ga...
Cost leadership (1)With this strategy, the objective isWith this strategy, the objective is    to become the lowest-cost  ...
Cost leadership (2)• Why is cost leadership important?  – If selling prices are broadly similar, the    lowest-cost produc...
Likely attributes of a cost leader• High levels of productivity• High capacity utilisation• Use of bargaining power to neg...
Cost focus• Here a business seeks a lower-cost  advantage in just one or a small number  of market segments• The product w...
Differentiation focusDifferentiation focus is the classicDifferentiation focus is the classic     niche marketing strategy...
For differentiation focus to work…• Market segmentation  – Clearly identifiable customer needs and wants  – A valid basis ...
Differentiation leadership      With differentiation      With differentiation   leadership, the business    leadership, t...
Differentiation leadership (2)• Involves selecting one or more criteria used by buyers  in a market - and then positioning...
Ways to achieve differentiated leadership • Superior product quality (features,   benefits, durability, reliability) • Bra...
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Porter's Generic Strategies

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This revision presentation explains how Michael Porter suggested four "generic" business strategies that could be followed in order to gain competitive advantage. The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments. By contrast, the differentiation focus and cost focus strategies are best used in a narrow market or industry

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Porter's Generic Strategies

  1. 1. Porter: Generic Strategies
  2. 2. The marketing strategy challenge To find a way of achieving a To find a way of achieving a sustainable competitive sustainable competitive advantage over the other advantage over the other competing products and competing products and firms in a market firms in a market
  3. 3. What is a competitive advantage? An advantage over competitors An advantage over competitors gained by offering consumers gained by offering consumers greater value, either by means of greater value, either by means of lower prices or by providing lower prices or by providing greater benefits and service that greater benefits and service that justifies higher prices justifies higher prices
  4. 4. Porter’s Generic Strategies
  5. 5. Introducing Porter’s approach• Porter suggested four "generic" business strategies that could be followed in order to gain competitive advantage• The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments• By contrast, the differentiation focus and cost focus strategies are best used in a narrow market or industry
  6. 6. Cost leadership (1)With this strategy, the objective isWith this strategy, the objective is to become the lowest-cost to become the lowest-cost producer in the industry. This producer in the industry. Thistypically involves production on atypically involves production on a large scale which enables the large scale which enables the business to exploit economies of business to exploit economies of scale. scale.
  7. 7. Cost leadership (2)• Why is cost leadership important? – If selling prices are broadly similar, the lowest-cost producer will enjoy the highest profits• Suitable markets for this strategy? – Standard product – Little product differentiation – Branding relatively unimportant
  8. 8. Likely attributes of a cost leader• High levels of productivity• High capacity utilisation• Use of bargaining power to negotiate the lowest prices for production inputs• Lean production methods (e.g. JIT)• Effective use of technology in the production process• Access to the most effective distribution channels
  9. 9. Cost focus• Here a business seeks a lower-cost advantage in just one or a small number of market segments• The product will be basic - perhaps a similar product to the higher-priced and featured market leader, but acceptable to sufficient consumers• Such products are often called "me- toos"
  10. 10. Differentiation focusDifferentiation focus is the classicDifferentiation focus is the classic niche marketing strategy niche marketing strategy A business aims to differentiate A business aims to differentiatewithin just one or a small numberwithin just one or a small number of target market segments of target market segments
  11. 11. For differentiation focus to work…• Market segmentation – Clearly identifiable customer needs and wants – A valid basis for differentiation – Business able to meet the needs of the segment• Some possible approaches – Higher / highest quality – Specialist expertise / experience – Exclusiveness (e.g. through distribution)
  12. 12. Differentiation leadership With differentiation With differentiation leadership, the business leadership, the business targets much larger markets targets much larger markets and aims to achieve and aims to achievecompetitive advantage acrosscompetitive advantage across the whole of an industry the whole of an industry
  13. 13. Differentiation leadership (2)• Involves selecting one or more criteria used by buyers in a market - and then positioning the business uniquely to meet those criteria• Usually associated with charging a premium price for the product - often to reflect the higher production costs and extra value-added features provided for the consumer• Differentiation is about giving customers clear reasons to prefer the product over other, less differentiated products• The strategy is not easy and it requires substantial and sustained marketing investment.
  14. 14. Ways to achieve differentiated leadership • Superior product quality (features, benefits, durability, reliability) • Branding (strong customer recognition & desire; brand loyalty) • Industry-wide distribution across all major channels (i.e. the product or brand is an essential item to be stocked by retailers) • Consistent promotional support – often dominated by advertising, sponsorship etc
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