In this article we describe Porter’s Generic Competitive Strategies, three different competitive strategies that organizations can employ to create added value and distinctive features relative to their competitors.
In this article you can expect:
What is the Porter’s Generic Competitive Strategies Model?
According to Porter there are three different competitive strategies that organizations can employ to create added value and distinctive features relative to their competitors. Porter differentiates the following strategies:
- Low costs strategy
- Differentiation strategy
- Focus strategy
Porter’s Generic Competitive Strategies is a convenient aid in formulating a strategy for a business (per SBU). Choosing a competitive strategy to be followed plays an important role in the strategic marketing plan. Note: Another name for Porter’s Generic Competitive Strategies is Porter’s Typology.
Why Porter’s Generic Competitive Strategies?
Porter’s Generic Competitive Strategy is a worthy aid to arrive at good strategic choices. Porter’s Generic Competitive Strategies help in choosing a good competitive strategy and provide insight in making the correct choices to prevent the “stuck in the middle” principle.
How does the model look like?
Porter’s Generic Competitive Strategy
Low costs strategy
Low costs strategy is based on optimising corporate processes and thereby bringing out a cost advantage compared to the competitors. The focus in this strategy lies in raising the margin while constantly attempting to sell the product against the lowest possible price. By lowering the cost price and improving operational corporate processes, the business is able to implement a lower sales price than the competitor. A substantially better performance is thereby possible.
In choosing differentiation strategy, a business tries to differentiate the competition. The aim for this is to create a unique and/or superior image. By choosing one or more properties of a product that is perceived to be important and by implementing substantial changes compared to the standard, this picture can then be created. Buyers want a price premium payment for this unique product through which a substantially better performance becomes possible.
A focus strategy is targeted on competitors in a market niche instead of the total market. By focusing, the producer has a superior knowledge of the target segments through which the demands of the consumer can be better addressed. There are two possibilities in the focus strategy: Focus on costs Focus on differentiation These are based on the abovementioned low costs strategy and differentiation strategy aimed only to a niche. Stuck-in-the-middle A choice must be made for one of the strategies above. If a business does not makes any clear choice, the stuck-in-the-middle phenomenon will rear its head. There will be no possibility for exceptional performance.
Porter’s Generic Competitive Strategies is a convenient aid in determining a competitive strategy for a business. By making use of Porter’s Generic Competitive Strategies in choosing a competitive strategy, a business is able to make good strategic choices and with it come to above-average performance. Determining a competitive strategy plays an important role in strategic marketing plan.