Question

Discuss Porter’s five generic strategies and provide an example of each.

Answer 1

Porter’s five generic strategies

Porter's Five Forces framework is a method to analysing competitive environment, strength and position of a business. Porter's Five forces are ; • Threat of new entrants• Bargaining power of customers• Bargaining power of suppliers• Threat of substitutes• Competitive rivalry.

Porter's Five generic strategies describes how a company pursues competitive advantage in its choosen market on the basis of cost leadership, focus and differentiation. These are the main streams in the Poster's generic strategy. These main strategies are divided into 5 types, they are • Low-cost strategy • Best-value strategy • Focus-Low cost • Focus best value and • Differentiation.

● Cost Leadership : Cost leadership is mainly focused on minimizing the cost of organization in delivering products and services. It aims at increasing profit by reducing cost along with providing goods and services in industry average price to the customers. ● Focus : Focus strategy mainly concentrate on particular market and identifies the needs and expectations of the customers inorder to produce unique and dynamic products according to the customers needs. ● Differentiation : Differentiation strategy focuses on producing different forms and more attractive products than the rivalry companies or the competitors. To make differentiate products in the market, the organization should conduct surveys and research, develop innovative ideas, introduce effective sales and marketing, etc..

Porter’s five generic strategies and example of each

• Low-cost strategy

• Best-value strategy

• Focus-Low cost

• Focus best value and

• Differentiation.

COST LEADERSHIP	1. Low-cost strategy : Low-cost strategy aims at providing products and services to the customers in a lowest price or cheapest price available in the market. This strategy attracts a wide range of customers, that is it target large market.
2. Best-value strategy : Best-value strategy aims at offering products and services to the customers in best price value, which are lower price than the similar products of rivalry companies.
EXAMPLE	Wal-Mart company, they always focuses on becoming lowest cost producer. They are concentrated on wide range of customers in the market. They keep retail price lower and company is successful in maintaining its profit margin within it. They had a well set of system that helps it achieve its strategy of low prices every day.

FOCUS	3. Focus-Low cost : Focus-low cost focuses on small group of customers in the market and try to fullfil all the needs of that particular small group. Through this strategy, products and services are offered in very lowest price available in the market to the small group of customers.
4. Focus-best value : Focus-best value focuses on small group of customers to offer products and services in best price value available in the market at very lowest price than the price of the rivalry company's similar products. Sometimes it is also called focused differentiation.
EXAMPLE	PEPSICo, is one of the largest consumer packaged goods company. They concentrate on limited part of the market, that is they providing packaged goods for the consumers in lower prices. This firm benefits from specialization, they uses focus strategy to enjoy a high degree of customer loyalty.

DIFFERENTIATION

5. Differentiation : This strategy aims at producing different products and services in innovative and attractive form which can benefits competitive advantage. This strategy will always focuses on developing plans and strategies for producing new and diversified products than rivalries.

EXAMPLE

McDonald's, is of the best example of being different and unique from the competitors. It has an image that is maintained from the starting point to now. McDonald's customers are all classes, which includes large income group to lower income group.They had an unique form of service strategy all over its branch.They introduces different forms of services to attract all age groups, for example they attracts kids by their happy meal, that contain food along with toys for the children.

( 5 strategies are different types of the main streams of generic strategy, therefore example for some of them are same, for example focus-low cost and focus-best value comes under the focus strategy and content of those two are same with slight differences. That is why I gave common example for those two )