PORTER’s GENERIC

STRATEGIES

Submitted to: Mrs Mandeep Kaur

Submitted by: Sharandeep Kaur
Honey(4006,4007)
 INTRODUCTION
 Michael
….. E. Porter is a professor at Harward Business
School
 Porter argued that a firm’s strength ultimately fall
into into one of three headings: Cost leadership ,
Differentiation or Focus(Cost focus &
Differentiation focus)
 Porter defined two types of competitive advantage:
lower cost or differentiation relative to its rivals.
 Porter's generic strategies detail the interaction
between cost minimization strategies, product
differentiation strategies, and market focus
strategies.
 GENERIC STRATEGIES

Cost DIFFERENTIATIO FOCUS

Leadership
• Superior profits
N
• Creating a product or • Concentrate
through lower services that offer on limited
cost. unique attributes that
part of
• are valued by
customers. market.
• E.g. : Wal-Mart , • Cost focus
• E.g.: Nokia , Samsung ,
Redmi Phones Medimix. • Differentiation
focus.
• E.g.: PepsiCo. ,
Apple.
•
 PORTER’s GENERIC STRATEGY...

Porter called the generic

strategies "Cost
Leadership" (no frills),
"Differentiation" (creating
uniquely desirable
products and services) and
"Focus" (offering a
specialized service in a
niche market). He then
subdivided the Focus
strategy into two parts:
"Cost Focus" and
 COST LEADERSHIP
 STRATEGY
Aiming .. cost producer.
to become lowest
 Increasing market share by charging lower prices, while still
making a reasonable profit on each sale because you've
reduced costs.
 The firm can compete on the price with every other
industries and earn high units of profits.
 Targets a board market.
 Competitive advantage is achieved by driving down cost.
 A successful cost leadership strategy requires that the firm
is the cost leader and is unchallenged in this position.
 Especially Beneficial : where customers are price sensitive.
 At the time of price war, the firm can maintain some
profitability while the competitors suffer losses.
SUCCESS MANTRA…

 Access to the capital required to make a significant

investment in production assets.
 Design skills for efficient manufacturing.
 High level of expertise in manufacturing process
engineering.
 Efficient distribution channels.
 A low-cost base (labour, materials, facilities), and a
way of sustainably cutting costs below those of
other competitors.
 RISK INVOLVED...

 Other firms may be able to lower their cost as well.


 As the technology improves , the competitor's may be
able to leapfrog the production capabilities, thus
eliminate the competitive advantage.

 There might be difficulty in sustaining cost leadership in
long run.

 A frim following a FOUCS strategy might be able to
achieve even lower cost within there segment.
• Xiao MI main strategy in keeping the prices low is through e-
commerce
• To keep marketing budget low in maintaining low price, Xiao
MI make full use of the advantage of the social media and
word of mouth.
• Xiao MI vision of making the high-end quality technology
cheap, Xiao MI sustain their high-end quality and features of
product by making use of social media.
• In accordance to Porter’s Generic theory, Xiao MI has
successfully achieved cost leadership competitive advantage
through economies of learning, economies of scale, process
technology and value chain.
• Xiao MI ability in applying the cost leadership strategy
through efficiency and maintaining high-end quality is
 DIFFERENTIATION
STRATEGY…
 Differentiation involves making your products or services different from and
more attractive than those of your competitors.
 A Differentiation strategy calls for the development of the product or service
that offer unique attributes that are valued by customers.
 The value added by the uniqueness of the product may allow them to charge
premium price from customers.
 The firm hopes that higher price will more than cover the extra cost incurred
in offering the new product.
 Differentiation can be based on product image or durability , after-sales
services , quality, additional features.
 A differentiation strategy is appropriate where the target customer segment
is not price-sensitive, the market is competitive or saturated, customers
have very specific needs which are possibly under-served, and the firm
has unique resources and capabilities which enable it to satisfy these
needs in ways that are difficult to copy.
 SUCCESS MANTRA…

 Access of leading scientific research.

 Highly skilled and creative product development team.
 The ability to deliver high-quality products or services.
 Effective sales and marketing, so that the market
understands the benefits offered by the differentiated
offerings.
 It is more appropriate for big companies.
 Strong sales team with the ability to successfully
communicate the perceived strength of the product.
 Corporate reputation for quality and innovation.
 RISK INVOLVED…

 Involves higher cost.

 Customers might become price sensitive and choose
price rather than uniqueness.
 Change in consumers taste.
 Rivals pursuing a Focus strategy may be able to achieve
even greater differentiation in there market segment.
 Large organizations pursuing a differentiation strategy
need to stay agile with their new product development
processes.
 Differentiation strategy is not suitable for small
companies.

• Medimix Ayurvedic differentiated itself on the HERBAL
plank two decades back when there where only
synthetic soaps.
• A new brand of herbal soaps launched in today’s context
has to probably define the herbal qualities through an
enhance mix of ingredients to convey differentiation
because HERBAL is the proposition of serval brands
both NEW and OLD.
• The established Medimix brand is currently running a
campaign , which conveys the brand benefits through
 FOCUS
STRATAGY…
 The focus strategy concentrate on narrow segment and within that
segment attempts to achieve either a cost advantage or
differentiation.
 The premise is that the need of the group can be better serviced by
focusing entirely on it.
 A Firm use focus strategy often enjoys high degree of customers loyalty.
 And this entrenched loyalty discourages other firms from competing
directly.
 Differentiation strategy is not suitable for small companies.
 Because of there narrow market focus , firm pursuing a focus strategy
have lower volumes and less bargaining power from their suppliers.
 Firm pursuing differentiation-focused strategy may be able to pass
higher cost on to customer since close substitute products do not
exist.
 SUCCESS MANTRA…

 Lower investment in resources.

 The firm benefits for specialisation.
 Provide scope for greater knowledge of a segment of the
market.
 Makes entry to new markets easier and less costly.
 Firm using a focus strategy often enjoy high degree of
customers loyalty.
 This is definitely an appropriate strategy for small
companies especially for those wanting to avoid
competition with big one.


 RISK INVOLVED…

 Limited opportunities for growth.

 Danger of decline in chosen segment.
 Risk of imitation.
 It's simply not enough to focus on only one market
segment because your organization is too small to serve
a broader market.
 Other focusers may be able to curve out sub-segments that
they can serve even better.

• US based PepsiCo conducted a major restructuring exercise in
1997-1998 by spinning-off its restaurant and bottling business.
The restructuring was aimed at achieving improved focus on
the company's core beverage (Pepsi-Cola) and snack food
operations (Frito-Lay).
• By successfully adopting the ''focus'' strategy since 1997,
PepsiCo has emerged as the second largest consumer
packaged goods company (in terms of revenues) in the world.
• By acquiring leading beverages' company like Tropicana products
(July 1998), South Beach Beverage Company (October 2000)
and Quaker Oats (December 2000), the company has
significantly strengthened its competitive position in the
beverages segment.