PORTER’S GENERIC STRATEGIES

A firm's relative position within its industry determines whether a firm's profitability is above or below
the industry average. Michael Porter has argued that a firm’s strengths ultimately fall into one of two
headings: cost advantage and differentiation. By applying these strengths in either a broad or narrow
scope, three generic strategies result: cost leadership, differentiation and focus. These strategies are
applied at the business unit level. They are called Generic Strategies because they are not firm or industry
independent.

1. Cost Approach

 It concentrates on keeping costs low.

 With lower costs, the company can offer the product or service lower than the
competition.
 This strategy has been employed by Chinese businessmen, and coined the Filipino term,
tubong lugaw.

2. Differentiation Approach
 The company makes its products or services unique and distinct.
 In this approach, the customer is willing to buy at a higher price as long as it can satisfy
his/her taste based on its quality, uniqueness, and distinct appeal or feature.
3. Focus Approach
 It is specializing or concentrating in a particular market segment just like what Rustan’s
Department Store is doing for a high-end market segment.
Tubong lugaw -small capital, large return investments.