What Are Generic Strategies?
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- Thu, 21-07-2016
Michael Porter suggested the generic strategies can be defined by two key dimensions, the scope of the strategy and the source of the competitive advantage. For scope the company can target up the broad market or narrow focus market. For targeting a broad market Online Industry expert Translation Services Company that provide you the services like Russian Public Relations translation services are really helpful.
This Documents Translation Services Provider helps you to target the audience explicitly with the right language. There are two types of generic strategies; cost leadership is used by low cost industries like commodities and glossary stores. Differentiation strategies are used by new technology industries like smart phone companies. The two generic strategies are characterized by cost and quality. Cost leadership involves low cost and adequate quality, while a differentiation strategy involves adequate cost and high quality.
Likewise if a company is innovative, decentralized, builds unique products and uses its own money well, than it has a good fit with differentiated strategy. Finally if the company does not have consistent features, it does not have any strategic fit, it is stuck in the middle, hence that’s not good. Cost leadership is really about the low cost provider for the broad customer base. Examples of companies that do this include Dell computer, Amazon, and Wal-Mart.
These companies all offer the products that are pretty similar to the marketplace, but they have lower cost. These low cost allow them to consistently imprison the higher incomes then their competitors. Differentiation is really about doing something different that make your broad market costumer willing to pay more for your products and services.
Example of companies that include this is Harley Davidson and apple. These companies offer products that are the demand of the costumer and they wishfully pay even high prices for them. These higher prices allow these companies to consistently capture high profits then their competitors.
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Cost focus is basically a cost leadership strategy in a narrow or focused market. ALDI is the great example of the focus cost leader. It targets a narrow and extremely price receptive audience and only prefers the products o which they can offer the huge discount. They strategically keep near to the established markets so that these penny pilfering extreme costumer can still go someone close to buy other things they need to get the other things, ALDI does not carry.
Differentiation focus is basically a differentiation strategy in a narrow or focus market. Motorcycles are the great example; they target the narrow slice of performance focused enthusiasts. Ferrari is another example they target performance focused drivers who have millions to play with.
So generally you can select any one of these four generic strategies in your efforts to achieve a competitive advantage. It is very difficult however to try to use more than one. Companies that try to do more than one frequently get stuck in middle. You can see when you cut costs aggressively than you also tend to cut products, features and services.
Thus it is very hard to differentiate your product when you are aggressively pursuing a low cost strategy. At sometimes you have to spend money to make your products better than the other products out there.