Question

Which of the following generic strategies is the most difficult to implement and why? Cite concrete examples.

Overall low-cost provider strategy; broad differentiation strategy; focused low-cost strategy; focused differentiation strategy; best-cost provider strategy

Answer 1

The Porter’s generic strategies are used to assess how the company will pursue its competitive advantage in its market. These strategies include:

• Overall Cost leadership where lower costs are used to achieve superior overall profits in the market.
• Broad Differentiation where a product/service is perceived unique by the customer throughout the industry.
• Focused low-cost strategy where the certain section of the market is selected for providing the lowest cost products/services.
• Focused differentiation strategy where differentiation is implemented concentrating to a limited section of the market.
• Best-cost provider strategy where the aim is to provide the best value for a relatively low price.

In my view, broad differentiation is the most difficult to implement, as using this strategy, the company needs to develop products that offer unique attributes that customers wants, and perceives as superior to the attributes offered by the competitors. With broad differentiation, the customer perception to be considered becomes very vague, as the market segment to consider is very big. For e.g., when a company uses broad differentiation, and charges a premium for those features, a customer segment might consider the premium pricing as too expensive for their choice, for instance, Apple products are perceived as very expensive by some customers, and thus they switch to or prefer its competitive brands.

Also, customers’ preferences change overtime, and too much focus on differentiating for such a large customer base can shift the focus from generating value for the customer, by developing unimportant features for the product, that can lead to a failure of the strategy. This happened in the case of Windows Vista, which backfired Microsoft as the heavy features were not user-friendly, which made users downgrade to XP.