Generic Strategies

Question 1

What is the basic strategy purpose?

Answer 1

Leverage strengths to achieve basic objectives and goals

Specific strategy- unique to that entity

Question 2

What are porters 3 generic strategies?

Answer 2

1) Cost leadership
2) Differentiation
3) Focus

Question 3

What is the cost leadership strategy?

Answer 3

To become the low cost provider in an industry

Possible alternative objectives:

• Sell goods or services at an average market price and earn profits higher than competitors
• Sells or goos below market price and gain market share

Entity pursues this cost leadership strategy:

• Seek to minimize cost
• Invest significantly in production and distribution of assets
• Have high levels of expertise in product design, manufacturing and distribution

Risks:

• The other entities will be successful in adopting cost leadership strategy
• Possibility improved tech will enable other entities to produce at a lower cost than you
• Multiple entities focus on segments of the industry and achieve low cost

Question 4

What is the differentiation strategy?

Answer 4

Develop product or service that offers quality or uniqueness valued by customers

• Value added by quality or uniqueness permits a premium price that more than covers cost of goods or services

Entity will have:

• Have skilled and creative product or service development personnel
• Have leading edge research capabilities
• Strong dedicated marketing and sales personnel
• Have a reputation innovation, quality and service

Risk: 
- customers change preferences 
- Customer economic status changes 
- Imitation by competitors "knock-off". 
- Multiple firms will focus on segment of market and separately achieve greater differentiation in those segments 
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Question 5

What is the focus strategy?

Answer 5

Achieve either cost leadership or differentiation within a narrow segment of industry called a “niche” market

identify a district subgroup within a market and focus on providing goods and services of that subgroup

entity who pursue a focus strategy will:

• Have outstanding market research and understanding of target group
• Have ability to tailor strengths in product or service development to target group
• High degree of customer satisfactions

RISKS:

• Smaller in size with lower volume = little bargaining power with suppliers
• imitation by competitors (knock-offs)
• Change in customer preferences
• Change in economic status
• Other entities may carve out subgroups of the target focus group