Porter’s generic strategies
Michael Porter is a well-known economist and business strategist who is known for his work on competitive strategy and the analysis of industries and competitors.
Porter’s generic strategies are a set of approaches that firms can use to achieve a competitive advantage in their market. There are three main generic strategies:
- Cost leadership: This strategy involves being the lowest-cost producer in the industry. Firms that adopt a cost leadership strategy seek to minimize costs in all areas of their operations, including production, marketing, and administration. In order to be successful with this strategy, firms must also be able to differentiate their products or services enough to attract customers despite their lower prices. Examples of firms that have successfully adopted a cost leadership strategy include Walmart and Ryanair.
- Differentiation: This strategy involves offering a unique product or service that is perceived as superior to those offered by competitors. Firms that adopt a differentiation strategy seek to differentiate their products or services in ways that are important to customers, such as through higher quality, better design, or more advanced technology. In order to be successful with this strategy, firms must be able to charge a premium price for their differentiated products or services. Examples of firms that have successfully adopted a differentiation strategy include Apple and Mercedes-Benz.
- Focus: This strategy involves targeting a narrow market segment and developing a specialized offering for that segment. Firms that adopt a focus strategy seek to tailor their products or services to meet the specific needs of their target market, and may use a cost leadership or differentiation strategy within that narrow market segment. Examples of firms that have successfully adopted a focus strategy include Nespresso and Zara.