Harvard Professor and author Michael Porter developed a “Generic Strategies Model” in which companies firms can use to overcome the five forces and attain competitive advantage. Here are the three strategies:
Cost Leadership Strategy. It is based on creating a low cost position relative to one’s peers. Cost leadership requires a tight set of interrelated tactics such as: aggressive construction of efficient-scale facilities, vigorous pursuit of cost reductions from experience, tight cost and overhead control, avoidance of managerial customer accounts, and cost minimization in all activities in a firm’s value chain.
Differentiation Strategy. This requires that the firm (or business unit) create products and/or services that are unique and valued. Differentiation consists of creating differences in the firm’s products or service offerings by creating something that is perceived industry-wide as being unique and valued by customers. Differentiation can take many forms such as: prestige or brand image, technology, innovation, features, customer service, or dealer networks.
Focus Strategy. Firms following a focus strategy must direct their attention (or “focus”) toward narrow product lines, buyer groups or geographical markets. Firms emphasizing a focus strategy must attain advantages either through differentiation or a cost leadership approach. This strategy is based on the choice of a narrow competitive scope within an industry. Competitive advantages are attained by focusing on a segment or group of segments that tailors its strategy.
https://www.cascade.app/blog/business-level-strategy
https://www.youtube.com/watch?v=_p8dIU09vH0&t=48s
Answer the following questions as they relate to this week’s readings and the video on Porter’s Generic Strategies Model:
1. Why is the concept of competitive advantage central to the study of strategic management?
2. Discuss a company or organization that solidifies the term, Focus Strategy, through their products or services.
Select ONE (1) of the following questions listed below and respond:
1. Choose and describe a company’s value chain and explain the various elements of the chain. Where does marketing fall in the chain?
2. In your own words, define the term best-cost differentiation.
