Question

Why does each generic business model require a different set of business-level strategies? Give examples of pairs of companies in (a) the computer industry, (b) the electronics industry, and (c) the fast-food industry that pursue different types of business models.

Answer 1

There are three generic competitive strategies suggested by Porter. They are differentiation strategy, focus strategy and low cost strategy. Each strategy is quite different. No single strategy can be applied on the overall market because needs of all customers in an industry are not same. Every business needs to segment market and design its offerings as per the needs of that market. After designing market offerings the company needs to excel in competition. To excel in competition the company needs to have distinct competencies. That is why each generic strategy requires a different set of product, market and distinctive competency.

For example: a. In computer industry HP and Apple follow different strategies. HP follows low cost strategy while Apple follows differentiation strategy. HP manufactures computers with affordable prices. Apple manufactures computers for people with high incomes. It charges heavy premiums on its products.

b. In auto industry Chevrolet and Mercedes follow different strategies. Chevrolet follows low cost strategy while Mercedes follows differentiation strategy. Chevrolet manufactures cars with affordable prices. Mercedes manufactures cars for people with high incomes. It charges heavy premiums on its products.