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In: Finance

outline and carefully analyze Porter's generic determinants of strategy?

outline and carefully analyze Porter's generic determinants of strategy?

Solutions

Expert Solution

As per Porter:

strategies allow organizations to gain a competitive advantage from
three different bases: cost leadership, differentiation, and focus.

Cost Leadership Strategies:
An abundance of costs
elements affect the relative attractiveness of generic strategies, including economies or
diseconomies of scale achieved, the percentage of capacity utilisation ion achieved, and connections with suppliers and distributors.

A successful
cost leadership strategy usually extends throughout the firm, as evidenced by high efficiency,
low overhead, intensive screening of fund requests,
wide spans of control, rewards linked to cost containment.


Differentiation Strategies: Different strategies offer different degrees of differentiation.
Differentiation does not ensure competitive advantage, particularly if standard products
sufficiently meet customer needs or if rapid copy by competitors is possible. A
successful differentiation strategy allows a firm to charge a higher price for its commodity
and to gain customer loyalty because consumers may become strongly attached to the differentiation features.


Focus Strategies: A profitable focus strategy depends on an industry segment that is of
adequate size, has good development potential, and is not crucial to the success other major
competitors. Policies such as market penetration and market development offer significant focusing benefits. Focus strategies are most effective when customers have
distinctive preferences or requirements and when rival firms are not striving to
specialise in the same target segment.


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