Porter Generic Stratey Essay

The key drivers of competitive advantage ar appeal lead and several(predicate)iation product COMPETITIVE STRATEGY- the means by which an organisation seeks to reach out and sustain a competitive advantage Porter suggests that competitive dodge means taking an offensive or defensive action to get a defendable position to cope with the competitive forces- this would lead to great returns Porter suggests that a firms strengths fall into two headngs cost advantage and specialty.By applying these strengths in a broad or determine centralize, three generic strategies result COST LEADERSHIP, DIFFERENTIATION AND nidusthey are generic because they are not specific to a firm or industry. 4 strategies to gain a competitive advantage COST LEADERSHIP-(superior bread through get off costs), DIFFERENTIATION-( high profits by adding value the products areas that are of rattling signifi tidy sumce for customers who are willing to requital a premium price), FOCUS STRATEGY-(concentrate o n a specific area on the market) COST LEADERSHIP- concentrates on becoming the final cost producer through economies of scale.With this, the organisation can compete on price with the potential to earn higher(prenominal) unit of measurement profits. Cost reduction provides the focus for the orgaisations strategy. Competitive advantage is achieved by impulsive costs down. There is room for only one cost attraction Firms that succeed in cost leadership have the following strengths admission to capital to make big investment, design skills, high level of expertise in manufacturing process, efficient distri aloneion channels . EXAMPLES- RYANAIR, TOYOTA, TESCO, AND WALMART Cost leadership is lots seen as a strategy that aims to attract customers with low prices made by low costs.. ut this doesnt necessarily mean the lowest selling price, but due to low costs, the profit margins are higher DIFFERENTIATION- this strategy calls for a development of a product or avail that calls un ique and valued attribute by customers. The customers believe that the product is different than rivals. the uniqueness gives a product added value which enables companies to charge a higher price premium. Successful speciality- differentiating products from competitiors, charging a higher price. an base differentiation on omage, durability, after-sales customer service/ needs strong R&D HOWEVER, adding value increases a firms cost base for a product which reduces the unit profit margin- these costs can only be recouped if the consumer is willing to pay the premium price. Also, customers must recognise these differences. EXAMPLES BMW, MIELE (HIGHER QUALITY DOMESTIC APPLIANCES), BANG AND OLUFSEN, MERC, ETC service a chance of charging a premium price, demand for differentiated slight elastic, above average profits, additional barriers to entry?Risks difficult to sustain, higher costs, run a risk of creating differences, comsumers may become too price sensitive, compititors who attain a focus strategy may achieve greater differentiation. FOCUS STRATEGY- Like differentiation, but organisation concentrates on one or more segments of the market, this may offer the firm more security for achieving its competitive advantage. However thither are specific requirements for the focus strategy. Firms benefit form specialisation, differentiation on a lower scale, so the costs are lower than full scale differentiation