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Generic competitive strategies presentation


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Generic competitive strategies presentation

  1. 1. GENERIC COMPETITIVE STRATEGIES Dr. Ahmad Javed Askarzai PhD Economics Vienna University of Austria
  2. 2. Introduction • Michael Porter suggested that businesses can secure a sustainable competitive advantage by adopting one of three generic strategies. • He also identified a fourth strategy "middle of the road" strategy, which although adopted by some businesses, is unlikely to create a competitive advantage.
  3. 3. Generic strategies • Cost Leadership Strategy • Differentiation Strategy • Focus Strategy • Stuck In The Middle
  4. 4. Cost Leadership Strategy • This strategy involves the organisation aiming to be the lowest cost producer and/or distributor within their industry. The organisation aims to drive cost down for all production elements from the sourcing of materials, to labour costs. • by reducing production costs and therefore increasing the amount of profit made on each sale as the business believes that its brand can command a premium price or • - by reducing production costs and passing on the cost saving to customers in the hope that it will increase sales and market share
  5. 5. Example • Low cost producers include Easy Group, Ryan Air, and Walmart.
  6. 6. Differentiation Strategy • To be different, is what organisations strive for; companies and product ranges that appeal to customers and "stand out from the crowd" have a competitive advantage. • With a differentiation strategy the business develops product or service features which are different from competitors and appeal to customers including functionality, customer support and product quality.
  7. 7. Example • Brompton folding bicycles when folded are more compact than other folding bikes. Folding bikes are usually purchased by people with limited storage space at home or on the move; a compact bike is therefore a valued product feature and differentiates Brompton bicycles from other folding bicycles.
  8. 8. Focus Strategy • Under a focus strategy a business focuses its effort on one particular segment of the market and aims to become well known for providing products/services for that segment. They form a competitive advantage by catering for the specific needs and wants of their niche market. • A focus strategy is known as a narrow scope strategy because the business is focusing on a narrow (specific) segment of the market.
  9. 9. Example • Roll Royce, Bentley and Saga a UK company catering for the needs of people over the age of 50.
  10. 10. Roll Royce
  11. 11. Bentley
  12. 12. Are You "Stuck In The Middle" • Some businesses will attempt to adopt all three strategies; cost leadership, differentiation and niche (focus). • A business adopting all three strategies is known as "stuck in the middle". • They have no clear business strategy and are attempting to be everything to everyone. This is likely to increase running costs and cause confusion, as it is difficult to please all sectors of the market. Middle of the road businesses usually do the worst in their industry because they are not concentrating on one business strength.
  13. 13. Conclusion • To create a competitive advantage businesses should review their strengths and pick the most appropriate strategy cost leadership, differentiation or focus. • Although each of these strategies are known as generic strategies (because they can be applied to every industry) they will not suit every business. • Whatever strategy a business decides to adopt they should make sure that it isn't middle of the road because one business can not do everything well.
  14. 14. Thank you • Questions? • Copyrights, All rights reserved with Mag. Ahmad Javed Askarzai. • Strict action will be taken in case of Copy paste.