File Name: cost leadership and differentiation strategy .zip
A firm's relative position within its industry determines whether a firm's profitability is above or below the industry average. The fundamental basis of above average profitability in the long run is sustainable competitive advantage. There are two basic types of competitive advantage a firm can possess: low cost or differentiation.
- Introduction to Porter's Generic Strategies
- The trade-off between cost leadership and differentiation
- Porter's generic strategies
- BUS501: Strategic Management
Introduction to Porter's Generic Strategies
If the primary determinant of a firm's profitability is the attractiveness of the industry in which it operates, an important secondary determinant is its position within that industry. Even though an industry may have below-average profitability, a firm that is optimally positioned can generate superior returns. A firm positions itself by leveraging its strengths. Michael Porter has argued that a firm's strengths ultimately fall into one of two headings: cost advantage and differentiation. By applying these strengths in either a broad or narrow scope, three generic strategies result: cost leadership , differentiation , and focus. These strategies are applied at the business unit level. They are called generic strategies because they are not firm or industry dependent.
Porter's generic strategies describe how a company pursues competitive advantage across its chosen market scope. A company chooses to pursue one of two types of competitive advantage, either via lower costs than its competition or by differentiating itself along dimensions valued by customers to command a higher price. A company also chooses one of two types of scope, either focus offering its products to selected segments of the market or industry-wide, offering its product across many market segments. The generic strategy reflects the choices made regarding both the type of competitive advantage and the scope. The concept was described by Michael Porter in Porter wrote in that strategy targets either cost leadership , differentiation , or focus. Porter claimed that a company must only choose one of the three or risk that the business would waste precious resources.
The trade-off between cost leadership and differentiation
No company can totally avoid the impact of increasing costs. And most managers have learned to adjust to the effect inflation has on current operating costs. But few have factored it into their competitive strategies. And most managers, particularly those in capital-intensive industries, have not paid enough attention to the way increasing capital requirements affect […]. And most managers, particularly those in capital-intensive industries, have not paid enough attention to the way increasing capital requirements affect their ability to compete in the long run. As a result of research and consulting work he has done with a number of capital-intensive companies, this author thinks that any organization can better its strategic position despite, and even because of, inflation. In this article, he takes the reader step by step through a diagnosis and analysis of changing cost patterns as well as through the formulation of a strategic solution.
Different companies approach markets in different ways. Porter's Generic Strategies helps you classify these approaches into four categories. Porter identified 4 generic strategies that can be used to both classify company behaviour and drive company behaviour. It may be helpful to bring in the Five Forces analysis of your marketplace for this strategy and consider the Supplier and Buyer powers. Remember: Cost Leadership is a long term strategy — if you stop focusing on it, cost will start to creep back into the business in ways that were not required. Read more in our Guide to Strategic Cost Reduction. The Differentiation Strategy is where a business focuses on differentiating their products or services from competitors.
Michael Porter classifies competitive strategies as cost leadership, differentiation, or market segmentation. Michael Porter described a category scheme consisting of three general types of strategies commonly used by businesses to achieve and maintain a competitive advantage. These three strategies are defined along two dimensions: strategic scope and strategic strength. Strategic scope is a demand-side dimension and considers the size and composition of the market the business intends to target. Strategic strength is a supply-side dimension and looks at the strength or core competency of the firm.
Porter's generic strategies
The University of Akron. E-mail: rgehani uakron. After the economic slowdown, and with increasing assault from enterprises from emerging economies, many innovative strategic leaders of multinational enterprises are forced to radically transform their enterprises.
BUS501: Strategic Management
Porter is considered by many as the most influential strategist in the field of business-strategy. His three generic strategies introduced in has become a dominant paradigm in business policy literature and has had a deep and pervasive influence on the way of thinking in strategy formulation. The development of a competitive strategy is the search for a favourable competitive position in an industry, aiming to establish a profitable and sustainable competitive advantage over its rivals by choosing activities that are superior in a way that is of value to customers Porter, ; Porter,
Они лежали на широкой кровати под балдахином в Стоун-Мэнор. О кольце он позаботиться не успел, слова пришли сами. Именно это и нравилось ей в нем - спонтанность решений.
Коммандер, - сказала она, - если власти говорят, что он умер от сердечного приступа, это значит, мы к его смерти не причастны. Его партнер поймет, что АНБ не несет за нее ответственности. - Не несет ответственности? - Глаза Стратмора расширились от изумления. - Некто шантажирует АНБ и через несколько дней умирает - и мы не несем ответственности. Готов поспорить на любую сумму, что у партнера Танкадо будет иное мнение.
- Вам нужно проверить, как это выглядит. Бринкерхофф окинул взглядом ее фигуру. - Отсюда выглядит просто отлично.
В нем не было ни картин, ни мягкой мебели, ни фикусов в горшках, ни антикварных часов.