Michael Porter suggested three generic competitive strategies: cost leadership, differentiation, and focus. Cost leadership involves having the lowest costs in the industry to compete on price for a broad market. Differentiation targets a broad market by making the product or service unique in some way. Focus strategy involves targeting either a cost or differentiation advantage at a narrow market segment. Companies must choose one of these strategies to gain a competitive advantage.

1. PORTER’S GENERIC
COMPETITIVE STRATEGIES
PORTER’S GENERIC COMPETITIVE STRATEGIES

2. Introduction: The rationale behind
studying competition
 Today, companies face their toughest competition
ever.
 Companies use their understanding
 Companies must also understand their competitors

3. Porter’s Generic Strategy Framework
 Michael Porter has suggested three general types
of positioning strategies to achieve competitive
advantage.
 These three generic strategies are defined along two
dimensions: strategic scope and strategic strength.
 Strategic scope
 Strategic strength

4. Porter’s Generic Strategy Framework
 Michael Porter has suggested three general types
of positioning strategies to achieve competitive
advantage.
 These three generic strategies are defined along two
dimensions: strategic scope and strategic strength.
 Strategic scope looks at the size and composition of
the market you intend to target.
 Strategic strength is a supply-side dimension and looks
at the strength or core competency of the firm.

5. Porter’s Generic Strategy Framework
Advantage Advantage
Target Scope
(Low Cost) (Product
Uniqueness)
Broad Cost Leadership Differentiation
(Industry wide)
Narrow Focus Strategy Focus Strategy
(Market wide) (low cost) (differentiation)

6. Cost Leadership
 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.

7. Examples of Companies That Use Cost
Leadership Strategies
 Wal-Mart
 Dell Computers
 Tata Steel

8. Differentiation strategy
• About differentiation strategy.
• Helps To “stand out from the crowd”
• Also called as “Broad Scope Strategy”
• Risks involved with the adoption of
differentiation strategy.
• Few ways to succeed while using
differentiation strategy.

9. Few Examples
• Mc Donalds
• Kamat Hotels ( India) Limited
• Emami Fair and Handsome
• Kinetic Honda by launching two Wheelers with
electric ignition
• Dominos pizza- 30 minutes home delivery or free

10. Market Segmentation / Focus
• About Focus Strategy.
• Focus on one particular segment of Market.
• Also Know as Niche Strategy.
• Competitive Advantage.
• Cost focus Strategy.
• Differentiation focus Strategy.
• Helps in implementing premium price.
• Also knows as narrow scope strategy.
• Successful in attaining high degree of Customer
Loyalty.

11. Example of Focus Strategy
 Ferrari and Rolls Royce.
 Taj Hotels
 ITDC-The Ashok Group of Hotels
 Southwest Airlines.
 PEPSICO

12. Stuck in the middle
 A company’s failure to make a choice between cost
leadership and differentiation essentially implies that
the company is stuck in the middle.
 There is no competitive advantage for a company that
is stuck in the middle and the result is often poor
financial performance .
 However, companies like Toyota and Benetton have
adopted more than one generic strategy. Both these
companies used the generic strategies of differentiation
and low cost simultaneously, which led to the success
of the companies.

13. Criticisms of Porter’s Generic
Strategy Framework
 A business can employ a hybrid strategy without
being struck in the middle. Nissan, for instance.
 Cost leadership does not sell products itself.
 Differentiation can be used to increase sales
volume rather than charging a premium price.
 Price can sometimes be used to differentiate.

14. Criticisms of Porter’s Generic
Strategy Framework
 The competence based strategy framework
supersede the generic strategy framework.
 Despite these criticisms, porter’s model can
constitute the basis of a useful framework for
categorizing and understanding sources of
competitive advantage.