Porter identified three generic competitive strategies:
- Cost leadership
- Business sets out to become a low cost producer in its industry.
- Business strategy is to control cost through pursuing things such as economies of scale.
- A strategy that focuses on the business being unique in it’s industry.
- Price premium > Costs of differentiation.
- There must be a difference between the focus target market segment and the market.
- The segment must be structurally attractive.
- Three main strategies:
i. Focus on short runs by investing in technology or methods that give cheaper or quicker turnaround.
ii. Cost advantage in its target segment.
iii. Differentiate focus because the broadly targeted competitors may not be meeting the needs of the segment.
Risks of Generic Strategy
|Sales Growth||Differentiation is lost; competitor, bases of differentiation unimportant.|
|Proximity in differentiation is lost.||Cost proximity is lost.|
|Cost proximity is lost.||Differentiation Focus achieves even more differentiation in segment.|