Michael Porter's Generic Strategies

Sun, 03/30/2014 - 21:34 -- Gulzar Ahmed

Porter's Generic Strategies

Porter's Generic Strategies are also called Porter marketing techniques. These strategic tactics used by different companies in order to penetrate a market and after penetration then sustain a strong advantage over the competitions. It can also be elaborate as “the primary aim of a company is to attract the industry in which it operates and secondary purpose of the company is to position itself with in that industry.  A company positions itself or its products by the help of its strengths. The strengths may be product features and attributes or it may be well trained company staff, a well organized marketing campaign etc. Michael Porter emphasized that strengths of a company lies in its cost advantage and positioning.  The table exemplify the Michael Porter’s Generic Strategies.

porters generic strategies cost leadership, differentiation & focus

When a company applies these strengths this results in three generic strategies:

  1. Cost leadership Strategy
  2. Differentiation strategy
  3. Focus strategy

Cost Leadership Strategy

Cost Leadership marketing strategy used to penetrate the industry by using the cost of company’s products or services. This could be possible when a company increase efficiency and lowering operation and production costs, a company will be able to offer its specific products or services at a much lower rate to its target market, this will effectively make a company more attractive than competitors. Cost Leadership strategy can be very effective for those companies who want to penetrate a targeted market that's dominated by a few high-cost companies. In order to sustain the advantage a company also needs to regularly improve its product and services while maintaining cost leadership.

Some of the ways by which a company can acquire cost advantages are:

  1. Improving process efficiencies
  2. Gaining access to lower cost material
  3. Making optimal outsources
  4. Vertical integration decisions or
  5. avoiding some cost altogether

Differentiation Strategy

Now a day every company needs to tackle with saturated market as well as with strong competition. Differentiation strategy means development of such products and a service which offers unique attributes that are valued by customers. So successful company needs to develop and design such products and services which differentiate it from competitors.

Differentiation strategy of a company requires following internal strength:

  1. Well established R&D department
  2. Access to scientific research
  3. Skilled product developers and manufacturers
  4. Strong marketing and selling departments
  5. Reputation of the company for innovation and quality
  6. Reputed brand name

Focus Strategy

Focus strategy utilizes the old "divide-and-conquer" rule. Focus strategy includes the division of your target market into specific sections. Then a company needs to develop specific business marketing strategies for each section. Simple words we can say that focus strategy target a segments to apply both cost leadership and differentiation strategies.

Summing up all the above, as every companies have its predefined goals and objectives. Now company needs to achieve them by the means of some market tactics and these three Porters Generic Strategies provides a basic platform for a company.