Michael Porter Generic Strategies
Michael Porter Generic Strategies is a set of competitive strategies that are intended principally to the overall development of a business.
These strategies proposed by Michael Porter looking to gain a competitive advantage for the company, either through cost leadership, differentiation or focus.
Cost leadership
This strategy involves selling products very low unit prices, through a reduction in costs.
Will reduce costs, for example, through the production of standard products through the production of large volumes, use of economies of scale, efficient use of raw material supplies, use of new technologies, costs and stringent controls overhead, creating a culture of cost reduction in employees, reduced costs in office sales, marketing and advertising, etc.
Through the strategy of cost leadership, the company seeks to gain greater market share and thus increase their sales and may even, by having lower prices than the competition, some competitors out of the market.
The cost leadership strategy is recommended for use in mass market when the market consists of consumers who are sensitive to prices when there is little chance of obtaining differences between the products, when consumers do not care to the differences between both marks.
The disadvantages of using this strategy are that could be imitated by competitors, or that the interests of consumers could turn to other characteristics of the product, not just price.
Differentiation
This strategy is to produce or sell a product that is unique and original, that manages to distinguish itself from competition and not easily imitable by it.
There may be differentiated, for example, in designing the product, its attributes or characteristics, in the brand, quality, service, or provide good customer service, to offer additional services, speed of delivery, etc.
Through differentiation strategy, the company seeks consumers’ preference; prices may rise, if they recognize the distinguishing features of the product.
The differentiation strategy is recommended when the market consists of consumers who are insensitive to prices.
The disadvantage of using this strategy is that the competition can sometimes copy the distinguishing features of the product, so to use this strategy; these distinguishing features should be easily copied by competition.
Approach
This strategy is to focus or concentrate attention on a specific market segment, i.e. concentrate on producing or selling products that meet the needs and tastes of a particular group of consumers.
The strategy seeks to focus the company specializes in a particular type of consumer and therefore achieve more efficient, for example, by offering products that meet their specific needs or preferences, or to design strategies that take advantage of its features.
The focus strategy is recommended when the market is wide, if consumers have different preferences or needs when no competitors are targeting the same market segment.
The disadvantage of using this strategy is that competitors can identify the advantages of the segment to which the company is going, and decide to imitate, that consumer preferences are directed to product characteristics desired by the market in general, that has made a bad segmentation, and be missing the opportunity to attend to other markets.