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Michael Porter's generic strategies model
Michael Porter's generic strategies model
Michael Porter's generic strategies model
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Porter’s generic strategy typology and the Miles and Snow strategy typology are both examples of generic strategic models that a decision maker may find useful (Parnell, 2014). Both generic strategy frameworks explain generic business strategies by utilizing four different strategy types. A few of the strategies may share some common traits, however the frameworks are different in the approach they take to view and describe strategies (Parnell, 2014). Porter’s generic strategy model states that business units need to decide whether or not they want to focus on differentiating their products or have a focus towards obtaining the lowest cost possible (Parnell, 2014). Porter’s model also states that business units need to decide whether or not …show more content…
Therefore, I would hesitate to say that one typology would benefit an organization more than the other, regardless of size. However, as described in the previous paragraphs, different strategies do benefit businesses of different sizes. If I had to choose one typology for a start-up business, I would utilize Porter’s framework. I would argue that utilizing Porter’s framework may allow a start-up business a clearer understanding of what it expects to accomplish in an industry and whether it should initially focus on differentiation, low-cost, and whether to focus on a more targeted market or a broader market. These decisions will be critical for any new business that is likely to be forming in a growth industry that may be less well defined. The Miles and Snow framework may be more beneficial to a bigger business that is already operating in a better defined market as competitor strategies may be easier to determine at the point in the industry life cycle where bigger businesses are more likely to exist. Regardless of the generic strategy typology used, or the generic strategy chosen, it is important that strategic decisions, organizational structure, and organizational process are all aligned in order to increase the chance of success (Chereau,
There are two reasons why a firm may perform well in an industry, either 1) the industry is attractive to any firm 2) the firm is better and outperforms it’s rivals. Porter’s theory therefore can be used to discover the markets that are attractive to firms or, in those which aren’t breaking down the five forces so a strategy for success can be developed. In general the firm with be more profitable if each of the forces is low, that is to say there is a low threat of new firms entering, if buyers and suppliers have little power over the firm, if there is a low threat from substitute products and if competitive rivalry is low.
Dess, G. G., Lumpkin, G. T., Eisner, A. B., & McNamara, G. (2012). Strategic Management: Text & Cases (6th Ed.). New York, NY: McGraw-Hill.
Business strategy is the means by which firm’s plans to achieve its goals and objectives. It can also be termed as organization long-term planning. The strategy covers periods between 3-5 years and sometimes longer. Businesses use two major types of strategy, general or generic and competitive strategies. The overall strategy involves strategies of growth, globalization and retrenchment. The competitive advantage includes low pricing, product and customer differentiation. We will look at the business strategy used by Marks and Spenser (Cole, 1997). The company is a British multinational located at Westminster London and specializes in clothes and luxurious food products.
Arthur, A., Thompson, Margaret, A., Peteraf, John, E. Gamble, A., J., Strickland III. (2014). Crafting & Executing Strategy: The Quest for Competitive Advantage 19e: Concepts & Cases. C6-C25.
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 86(1), 25-40.
Porters model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. Especially, competitive strategy should base on and understanding of industry structures and the way they change.
Porter, Michael E. "From competitive advantage to corporate strategy." Harvard Business Review (1987): 43-59. Print. May 2014.
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.
Business level strategies identify the company’s overall competitive theme (Hill & Jones, 2013). In addition, business level strategies evaluate the ways a company creates its competitive advantage and the various positioning strategies that are used in a numerous of industry settings. Companies may use a cost leadership strategy, differentiation strategy, focus strategy, or a combination of these: Cost leadership is a company’s use of effectiveness in order to sell their products at the lowest price than its competitors. Differentiation strategy is the creation of desired products or services. Focus strategy is when a company offers specific services in a niche market. Focus strategies put emphasis on a precise role or division of the industry.
In a world of free trade, growing competition and accessibility to foreign markets, the need for methodical market analysis and assumptions is steadily rising in today’s business environment. It is just a normal way of thinking to primarily intent to eliminate the financial before entering a new and foreign market. This suggests that enterprises have to develop an overall strategy for their business in order to gain competitive advantage and consequently market share. With the words of Michael E. Porter, professor at Harvard University and leading authority on competitive strategy, this desirable market success is indirectly linked to the individual structure of a market. The unique structure of a single market influences the strategic behaviour and the development of a competitive strategy within a firm. The competitive strategy finally decides whether a company performs successfully on the market or not. Referring to this interpretation of business success, M. E. Porter established his five forces framework that enables directives to gather useful information about the business environment and the competitive forces in industries.
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.
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 25-40.
A diversified company has two levels of strategy: business unit (or competitive) strategy and corporate (or companywide) strategy. Competitive strategy concerns how to create competitive advantage in each of the businesses in which a company competes. Corporate strategy concerns two different questions: what businesses the corporation should be in and how the corporate office should manage the array of business units.
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.
Porter’s diamond model, introduced by Michael Porter (1990a) was created to understand the ways and the reasons firms and industries create competitive advantage. The model consists of four key elements: Factor condition, demand conditions, related and supporting industries, and firm strategy, structure and rivalry that includes two additional determinants, government and chance. (Porter, 1990a; Stone and Ranchodd, 2006; Dixit and Joshi, 2011).