GENERIC COMPETITIVE STRATEGIES

• According to Porter, there are three potentially

successful generic strategic approaches to cope up
with the five competitive forces as well as gain
competitive advantage.

Overall Cost Leadership

Differentiation
Focus
 PORTERS’ 3 GENERIC STRATEGIES
(BUSINESS LEVEL)
• Competitive advantage – providing customers
products and services more effective than
competitors.
• Difficult to imitate.
• A firm’s relative position - firm’s profitability is above
or below the industry average.
• The fundamental basis of above average profitability
in the long run is sustainable competitive advantage.
• Two basic types of competitive advantage:
Low cost &
Differentiation
Three Consistent Competitive Generic strategies used
by the organizations are:
Cost Leadership
Differentiation, and
Focus and Niche Strategies.
Purpose:
 Used to outperform competition and
 To defend its position in the industry
Each of these strategies is designed to give a firm a
competitive advantage.
 Strategic Advantage
Overall Cost
Differentiation
Leadership

Focus

Uniqueness Perceived Low cost

By the Customer Position
 Overall Cost Leadership:

• The aim is to gain a large market share.

• Company makes all possible attempts to achieve the

lowest costs in production and marketing.

• Efficiency is the key word.

• Reliance Industries, Bajaj Auto Ltd and TELCO are

the examples.
 Overall Cost leadership
• Emphasizes producing standardized products at a
very low per-unit for consumers who are price –
sensitive.
• Firm yields above – average returns in its industry
despite the presence of strong competitive forces.
Requirements:
• high relative market share
• favorable access to raw materials
• ready availability of cash to finance the purchase of
the most efficient equipment.
Examples: Reliance Industries, Ranbaxy Laboratories,
Gujarat Ambuja & National Can Company etc.
 Differentiation

• Aim is to achieve class leadership by creating

something which is perceived as unique.
• Can be achieved by creating highly differentiated
products and marketing programmes
– like design or brand image, customer service or
dealer network, or any other feasible dimension.
• Companies pursuing this strategy have major
strengths in R&D, design, QC and marketing.
Bata shoes, OTIS elevators, Cini Fans are some of
the examples.
 Differentiation
• Producing products and services considered unique
industry wide and directed at consumers who are
relatively price insensitive.
• Approaches to differentiation include developing
unique brand images (Levi’s jeans), unique
technology (MacIntosh stereo components), unique
featues (Jenn – Air electric ranges), unique channels
(Tupperware), unique customer service (IBM), or the
like.
• Adv: Can be readily perceived by the consumer.
• Viable strategy for earning above – average returns
in an industry, because it creates a defensible
position for coping with the five competitive forces.
 Focus
• Focus means producing products and services that
fulfill the needs of small groups of consumers.
• Limits its attention to one or a few market segments
can serve those segments better than firms that
seek to influence the entire market.
• For example, products such as Rolls – Royce
automobiles, Cross pens, and Hartmann luggage
are designed to appeal to the upscale market and
serve it well rather than trying to compete in the
mass market.
 Focus:

• Firms should be able to serve a narrow

strategic target effectively and efficiently.
• As a result, the firm achieves either of the
above two.
Ponds talcum powder is one of the examples.
 REQUIREMENTS FOR GENERIC COMPETITIVE
STRATEGIES:

OVERALL COST LEADERSHIP:

Commonly required skills Common organizational
and resources requirements

 Sustained capital  Tight cost control

investment and access to  Frequent, detailed control
capital reports
 Process engineering  Structured organization
skills and responsibilities
 Intense supervision of  Incentives based on
labour meeting strict quantitative
 Products designed for targets.
ease of manufacture
 Low-cost distribution
system
 REQUIREMENTS FOR GENERIC COMPETITIVE
STRATEGIES:

DIFFERENTIATION:
Commonly required skills
and resources
 Storing marketing abilities
 Product engineering
 Creative fair
 Strong capability in basic
research
 Corporate reputation for
quality or technological
leadership
 Storing cooperation from
channels
Common organizational
requirements
 Strong coordination among
functions in R&D product
development, and
marketing
 Subjective measurement
and incentives instead of
quantitative measures
 Amenities to attract highly
skilled labour, scientists or
creative people.
 REQUIREMENTS FOR GENERIC COMPETITIVE
STRATEGIES:

FOCUS:
Commonly required skills
and resources
 Combination of the above
policies directed at the
particular strategic target
Common organizational
requirements
 Combination of the above
policies directed at the
particular strategic target
 Risks of the Generic strategies:
Cost leadership Differentiation Focus
Sustaining problem Sustaining problem The target segment
due to due to becomes unattractive
Competitors imitate Competitors imitate because
Technology changes Bases become less Demand disappears
important
Differentiation Cost proximity is lost The focus strategy is
Proximity is lost imitated.
Cost focusers achieve Differentiation focusers New focusers sub-
even lower cost in achieve even greater segment the industry
segments differentiation in
segments
Broadly targeted
--- --- competitors overwhelm
the segment.