The article, What is Strategy?, was written in 2010 by Alan Murray. The author explains Michael Porter’s five competitive forces and how they affect your product or service’s strategic positioning in today’s competitive market. Consequently, knowing how to employ these five forces advantageously is critical to marketing a profitable product or service. Five forces analysis can help businesses to comprehend the variables affecting a ventures chance for success. In turn, this determines whether or not to increase capacity in an industry and to design competitive strategies. This can be done by recognizing barriers to entry, threats of substitution, the bargaining power of buyers, the bargaining power of suppliers, and rivalries amongst competitors. This essay will discuss the three strategies a business can utilize to make excellent profits and avoid Porter’s model of perfect competition. The strategies to be discussed include: overall cost leadership, differentiation, and cost focus.
The first strategy to be explained is overall cost leadership. Cost leadership is a low cost, competitive strategy that aims at the broad mass market and requires “aggressive construction of efficient scale facilities, vigorous pursuit of cost reductions from experience, tight cost and overhead control, avoidance of marginal customer accounts, and cost minimization in areas like R&D, service, sales force, advertising, and so on (Hunger, Wheelen, 2011). Some examples of companies that utilize overall cost leadership are: McDonald’s, Wal-Mart, and Aldi grocery stores. Wal-Mart uses everyday low prices to attract customers, McDonald’s utilizes basic fast food meals at low prices and Aldi grocery stores employ a divisi...
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...te large profit margins.
Comprehending strategy is critical to plotting a clear course for your company. Knowing how to use these strategies is a necessity for anyone who is attempting to bring a product or service to market. A ventures chance of success can be increased by understanding how to use Michael Porter’s five forces analysis by determining whether or not to increase capacity in an industry and how to develop competitive strategies. This essay discussed: overall cost leadership, differentiation, cost focus and why these strategies should be applied by managers to maximize profits and avoid Porter’s model of perfect competition in today’s marketplace. After reading the article, it is clear that companies should make strategic choices concerning which strategy to apply. “Sound strategy starts with having the right goal” as cited by Michael Porter (n.d.).
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