Question 2 Business level strategies are also referred to as Generic Strategies. Identify and discuss these Generic Strategies and how firms can use these to create a competitive advantage. Porters Generic Strategies Everyone wants a competitive advantage in this world. A competitive advantage is like a golden ticket to wealth and riches, to a world where your company rules. If one’s organisation is on the higher ground it is always perceived as an advantage over the competition. But that’s just fiction. We all know it’s not just sunshine and roses. It takes a lot to get to the top and be the best and sometimes the road can be challenging and full of holes and boulders that need to be overcome or pushed aside to achieve your goal. There are four approaches of generic strategies. They are one, “Cost Leadership (no frills)”, two, “Differentiation (creating uniquely desirable products and services)”, “Focus (offering a specialized service in a niche market)”. Focus was divided into two parts, “Cost Focus and Differentiation Focus” The Cost Leadership Strategy There’s nothing like the sweet smell of victory when you take away the customers of your competition with your better and awesome products. When an organisation develops an edge and manages to sell their products to the new market then they absolutely have a competitive advantage. When using this strategy there are two ways of achieving a competitive advantage. One is by reducing costs to increase profits, all the while charging average industry prices. Two, while still able to make a reasonable profit on all of the sales made just by reducing costs you can increase the market share by charging lower prices. This strategy involves being the leader on condition that t... ... middle of paper ... ...ofitability is likely to be lower if there is/are: Bargaining Power of Suppliers Weak Suppliers Strong Suppliers Bargaining Power of Buyers Weak Buyers Strong Buyers Threat of New Entrants High Entry Barriers Low Entry Barriers Threat of Substitute Products Few Possible Substitutes Many Possible Substitutes Competitive Rivalry Little Rivalry Intense Rivalry The third step is to compare the SWOT analysis results with that of the five forces results. As each strategic option comes up, ask yourself how that strategy can be used to: Reduce or manage supplier power Reduce or manage buyer power Come out on top of competitive rivalry Reduce or eliminate the threat of substitution Reduce or eliminate the threat of new entry (mindtools.com) Making a success of a generic strategy is the key by using either Cost Focus or Differentiation Focus.
Analyze the business-level strategies for the corporation you chose to determine the business-level strategy you think is most important to the long-term success of the firm and whether or not you judge this to be a good choice.
Adopting a strategy of differentiation makes firms provide products and services what are distinct in some way valued by customers.
Muhammad Mazhar Hayat Khan Student ID # 43969461 Internal analysis IGA Generic Strategy: Generic strategies also known as competitive strategies were put forward by Porter in 1980 (Brown, et al., 2016). By implementing these strategies, a company may achieve competitive advantage over its competitors. The three strategies are: Cost Leadership, Differentiation and, Focus. The focus of first two strategies i.e. cost leadership and differentiation is broad and industry-wide while the third is focus strategy which targets a niche market (Brown, et al., 2016).
According to Parnell, Porter’s generic strategy typology consist of a “basic economic assumptions about cost versus differentiation, and the whole notion of focus and market orientation but this strategy has some limitation” (2014). This strategy typology helps to simplify a complex industry by identifying and emphasizing the key strategic factors. These factors are low-cost with focus, low-cost without focus, differentiation without focus and differentiation with focus.
*Making Sense of Eight Competitive Positions* (*https://www.mindtools.com/community/pages/article/newSTR_93.htm) In many open markets, most goods and services can be purchased from any number of companies, and customers have a tremendous amount of choice. It’s the job of companies in the market to find their competitive edge and meet customers needs better than the next company. So, how, given the high degree of competitiveness among companies in a marketplace, does one company gain competitive advantage over the others? When there are only a finite number of unique products and services out there, how do different organizations sell basically the same things at different prices and with different degrees of success? This is a classic question that has been asked for generations of business professionals. In 1980, Michael Porter published his seminal book, "Competitive Strategy: Techniques for Analyzing Industries and Competitors", where he reduced competition down to three classic strategies: cost leadership product differentiation; and market segmentation. These generic strategies represented the three ways in which an organization could provide its customers with what they wanted at a better price, or more effectively than others. Essentially Porter maintained that companies compete either on price (cost), on perceived value (differentiation), or by focusing on a very specific customer (market segmentation). Competing through lower prices or through offering more perceived value became a very popular way to think of competitive advantage. For many businesspeople, however, these strategies were a bit too general, and they wanted to think about different value and price combinations in more detail. Looking at Porter's strategies in a different way, in 1996, Cliff Bowman and David Faulkner developed Bowman’s Strategy Clock. This model of corporate strategy extends Porter’s three strategic positions to eight, and explains the cost and perceived value combinations many firms use, as well as identifying the likelihood of success for each strategy. Figure 1 below, represents Bowman’s eight different strategies that are identified by varying levels of price and value. {draw:frame} Position 1: Low Price/Low Value
Narrow focus on limited value chain activities, competitor’s pricing war and lack of differentiation parity can erode the competitive advantage associated with cost leadership strategy. Similarly, imitation of differentiating features by competition and lack of perceived value of the differentiating features can erode the competitive advantage associated with differentiation strategy.
Thompson, A. A., Strickland, A. J., & Gamble, J. E. (2008). Crafting & executing strategy: The quest for competitive advantage (16th ed.). New York: McGraw-Hill Irwin.
Competitive advantage is the advantage for the competitors and gained by the offerings from the consumers that have the greater value either by the low prices of the products and by providing the benefits and services to the consumers that denotes the high price. It is a set of the innovative and different features of the company and the products and services sale to the consumers so that company can achieve the targets what they have decided and it is the betterment for the enterprise in the competitive market (Porter, 2011). There are three determinants which can be used in the competitive advantage that what the company produce for their consumers, their target market that what they have to achieved and the competition from the other entity
Both Porter and Miles and Snow’s strategy typologies are based on the concept of strategic equifinality, or the ability for firms to be successful via differing managerial strategies (Hambrick, 2003, p. 116). Porter 's strategy is more generic while Miles and Snow’s is more specific in nature. Porter’s generic strategy typology is based on economic factors centering on the source of a firm’s competitive advantage and the scope of a firm’s target market (González-Benito & Suárez-González, 2010). Porter’s typology emphasizes a firm’s cost, product differentiation or non-differentiation and market focus. When utilizing Porter’s strategy typology, a firm must first decide to target its products toward the mass market versus a market niche or focus. Secondly, a firm will determine if it wishes to minimize costs or differentiate its products with differentiation meaning that firms will most likely forego lower costs (Parnell, 2014, p. 184). This can lead a firm to develop a myriad of strategies between these options. Strategies which may have or not have focus, may or not be differentiated, may or not be low cost or any combination of strategies. In contrast to Porter, Miles and Snow’s typology is more specific in nature.
Strategic managers think in terms of three levels of strategy; Corporate, Business and Functional Level strategy. Corporate-level strategy is concerned with the strategy of the organisation as a whole, and includes all the units and product lines that make up the corporation (Samson & Daft, 2012). AirA...
For instance, Harley Davidson may be forced to change their marketing strategy due to the entrance of a new competitor into the market. Second, Harley Davidson has to learn new skills and technologies quickly. For example, technologies are changing rapidly, so it is crucial for Harley Davidson’s business plan to change or alter in order to keep up with innovation. Third, this organization has to effectively leverage its core competencies while competing with its competitors. This is, Flexibility is required for Harley Davidson to learn how to use primary value-chain activities and support functions in the way that allow the organization to produce their products at a lower cost with differentiated features compare to their competitors in the market
of a firm to attain new forms of competitive advantage (Müller, 2011). It is due to these
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 25-40.
There are four main business strategies that can be used they are Cost leadership strategy, Differentiation strategy, Focus strategy (low cost) and Focus strategy (differentiation). We can use Porter’s generic business strategies to understand the difference in these strategies.
Competitive strategy is the approach that an organisation takes in order to gain advantage over its competitors. According to Porter, there are two major sources of competitive advantages: costs and differentiation. Cost-based competitive advantage involves reducing production costs so that an organisation can earn higher profit margin or offer products at lower price compared to competitors. Differentiation-based competitive advantage involves offering unique properties that are not offered by competitors’ products. Differentiation allows an organisation to charge a premium for their products because they offer additional benefits to buyers.