Question

How effective are generic strategies? Should they be specifically tailored to each organization? (200 words)

Answer 1

The generic strategies were developed by Michael Porter. The strategies were:

1. Cost leadership

Strategy and its effectiveness

The cost leadership strategy focussed on gaining competitive advantage due to the low cost. The low cost is achieved by reducing cost at different levels of the value chain. It gives the benefit of high sales as compared to the competitors. Also, the controlled cost at each level of value chain increases the profit margins. Hence, this strategy is effective for the organisation for achieving their profit maximisation objective.

Limitations

There are price wars when two or more firms follow the cost leadership strategy which leads to lowering of profits.

1. Differentiation

Strategy and its effectiveness

Different variety of products is created for different segments under this strategy. The firms provide different product to the customers. The unique products are created by enhancing the research and development part of the organisation. It helps to gain the competitive advantage. Sometimes, the high prices are charged to the customers for providing differentiated product.

Limitation

The costs are increased when the Company spends more on research and development.

1. Focus

Strategy and its effectiveness

The firms match the goods and services to the special niche segment under the focus strategy. The main advantage of this strategy is that a particular segment is focussed which understands the market, appreciated the product and pay the high prices.

Limitation

The niche segment disappears with the time and has limited possibilities of growth.

Tailor made strategies benefit

The tailor made strategies for the organisation are the strategies which are typically built for the organisation and cannot be easily copied by the competitors. The firms involve creating difference in their product and costs by changing their production processes and various other processes. These strategies help to achieve the success by beating the competition.