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In: Economics

Define Michael Porters Generic Strategies (Cost Leadership, Differentiation & Focus Strategies)

Define Michael Porters Generic Strategies (Cost Leadership, Differentiation & Focus Strategies)

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Expert Solution

Cost leadership strategy: It describe getting the maximum sale and taking the advantage from your competitors. This strategy helps us in two ways:

  • Increasing profits by reducing costs, while charging industry average prices.
  • Increasing market share by charging lower prices, while still making a reasonable profit on each sale because you've reduced costs.

Those adopting this strategy must have the low cost base which helps in raising quantity produced while not giving cost a hike, enough capital to invest in technology needed.

The Differentiation Strategy: It involves making your products or services different and more attractive than those of your competitors. It depends upon how you will typically involve features, functionality, durability, support, and also brand image of your product that your customers value. To adopt this strategy, one must have:

  • Good research, development and innovation.
  • The ability to deliver high-quality products or services.
  • Effective sales and marketing, so that the market understands the benefits offered by the differentiated offerings.

The Focus Strategy: Companies that focuses on this strategy concentrate on particular niche markets and understand the dynamics of that market and the unique needs of customers within it, develop uniquely low-cost or well-specified products for the market as they serve customers in their market uniquely well, they tend to build strong brand loyalty among their customers. This makes their particular market segment less attractive to competitors.


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