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GENERIC COMPETITIVE STRATEGIES
COST, LEADERSHIP, DIFFERENTIATION & FOCUS
MMM SEM V
Krupa Rai
Michael E. Porter
Michael E. Porter is a leading authority on competitive
strategy; the competitiveness and
economic development of nations.
“Father Of The Modern Strategy Field”
Krupa Rai
GENERIC COMPETITIVE STRATEGIES
Cost Leadership
Cost Focus
Differentiation Leadership
Differentiation Focus
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Scope of Business Products
Cost Focus
Differentiation Focus
Differentiation Leadership
Broad Narrow
Sour
ce o
f Com
petiti
ve A
dvan
tage
Diff
eren
tiatio
nCo
st Cost Leadership
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COST LEADERSHIP
• It describes a way to establish the competitive advantage.
• Cost leadership, in basic words, means the lowest cost of operation in the industry.
• The cost leadership is often driven by company efficiency, size, scale, scope and cumulative experience (learning curve).
• A cost leadership strategy aims to exploit scale of production, well defined scope and other economies
Eg. producing highly standardized products, using high technology.
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Examples….
Video
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Scope of Business Products
Cost Focus
Differentiation Focus
Differentiation Leadership
Broad Narrow
Sour
ce o
f Com
petiti
ve A
dvan
tage
Diff
eren
tiatio
nCo
st Cost Leadership
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COST FOCUS
• Cost focus exploits differences in cost behaviour in segments
• The firm can choose to compete in a defined, focused market segment with a narrow scope
• In adopting a narrow focus, the company ideally focuses on a few target markets
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WHAT MAKES A SEGMENT ATTRACTIVE FOR FOCUSING?
• Size of the segment is big enough to be profitable• Size of the segment is small enough to be of secondary
interest to large rivals• Has good growth potential• Less vulnerable to substitutes
• Not crucial to the success of major competitors
• Buyers in the segment require specialized expertise OR customized product attributes
• No other rivals are concentrating on the segment
Points to remember……
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Example….
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Krupa Rai
Scope of Business Products
Cost Focus
Differentiation Focus
Differentiation Leadership
Broad Narrow
Sour
ce o
f Com
petiti
ve A
dvan
tage
Diff
eren
tiatio
nCo
st Cost Leadership
Krupa Rai
DIFFERENTIATION LEADERSHIP• Customers perceive the product to be different and
better than that of rivals
• A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers.
• Approaches to differentiation include developing UNIQUE brand images, technology, features, channels, and customer service
Krupa Rai
Examples….
Krupa Rai
Examples….
Krupa Rai
Scope of Business Products
Cost Focus
Differentiation Focus
Differentiation Leadership
Broad Narrow
Sour
ce o
f Com
petiti
ve A
dvan
tage
Diff
eren
tiatio
nCo
st Cost Leadership
Krupa Rai
DIFFERENTIATION FOCUS
• Firms that are successful in a focus strategy are able to tailor a broad range of product development strengths to a relatively narrow geographic market segment, or to a particular buyer group or segment
• Also target market segments that are less vulnerable to substitutes.
• Also called a segmentation strategy or niche strategy
Krupa Rai
Examples….
Krupa Rai
Scope of Business Products
Cost Focus
Differentiation Focus
Differentiation Leadership
Broad Narrow
Sour
ce o
f Com
petiti
ve A
dvan
tage
Diff
eren
tiatio
nCo
st Cost Leadership
Cost Leadership
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BEST COST PROVIDER STRATEGY• Low cost, differentiation markets (a hybrid)
• Broad markets and market niches (middle ground)
• Value conscious buyers
• Those who shy away from cheap, low-end products and expensive high-end products
• Willing to pay a fair price for functionality and performance
• More for the money
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BEST COST PROVIDER STRATEGY‣ Positioning near the middle of the market
‣ Combines other basic strategies
‣ Medium quality at below average price, or
‣ Somewhat higher quality at an average or slightly higher price
‣ Adjust strategy for economic conditions, i.e. more value conscious
‣ Match strategy to internal resources and capabilities
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Examples….
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Krupa Rai
• http://www.youtube.com/watch?v=UA3C0SK-bEs
• http://www.youtube.com/watch?v=6kgMMgqLL24
