Michel Porter's typology for generic business strategy assumes
that the cost leadership, differentiation strategy and focus are
the three strategies which are independent in particular
organization or environment. According to porter's typology
organization can improve the market sale either by aiming to low
price producer in the organization or by differentiating the
products or services as compared with the other business in the
market. Both of theses strategies are coupled with a focus on
industrial effort for a given market segment. It takes into account
a broad market scope as well as narrow market scope. Let me briefly
explain what are porters's generic business strategies with
example.
Cost leadership:
- The objective of this strategy is to set a comprehensive price
advantages in the business in order to offer the product or service
with low price or the price below market price.
- The price or cost advantage of the product or service may
varied based on the structure of the industry, They may include the
special kind of economic scale, preferential access to the
resources and other factors, proprietary technology.
- This strategy offer's cost conscious or price sensitive
customer in order to win the market share.
- In order to understand how cost leadership has gained profit it
is necessary to identify the benefits of low price. Low cost means
industry can still able to earn once after its competitor are
competed away their profit by rivalry.
- this strategy tries to supply standard, high volume product
with no frills at low price to the customer. Cost leadership is
preferred in developing countries like India, china, Indonesia,
Malaysia, because they have low labor cost therefore production
cost will be less.
- This strategy is more competitor oriented rather than the
customer oriented, it needs strong focus on the supply side rather
than the demand side of the market.
Differentiation
- in this strategy the business seeks for a unique in its
business along with some dimensions that are much valued by the
customer.
- here the competition is not based on the price but with the
quality.In order to achieve this the business distinguish the
features that are very difficult to copy by the competitors.
- An excellent example for the differentiation strategy is Apple.
Apple usually sets the new trends in industry through very unique
and innovative product design and those are developed most of loyal
customers , it became very difficult to other companies to copy
their feature.
- Differentiation may be based on brand ( such as Mercedes Benz),
design( Titan watches which includes the design with precious
metals, diamonds, gold studded stuff etc),positioning (domino's or
swiggy 30 mins delivery), technology (Apple i
phone),innovation(3M)