Porter Generic Stratey Essay Example for Free

Porter Generic Stratey EssayThe key drivers of competitive payoff be cost leadership and diverseiation product COMPETITIVE STRATEGY- the means by which an organisation seeks to achieve and stand a competitive advantage Porter suggests that competitive strategy means taking an offensive or defensive action to create a defendable position to cope with the competitive forces- this would lead to greater returns Porter suggests that a firms strengths fall into two headngs cost advantage and differentiation.By applying these strengths in a broad or narrow focus, three generic strategies result COST LEADERSHIP, DIFFERENTIATION AND pointthey are generic because they are not specific to a firm or industry. 4 strategies to win a competitive advantage COST LEADERSHIP-(superior profits through economic crisiser costs), DIFFERENTIATION-(higher profits by adding cherish the products areas that are of real significance for customers who are willing to pay a premium price), FOCUS STRATE GY-(concentrate on a specific area on the market) COST LEADERSHIP- concentrates on becoming the lowest cost manufacturer through economies of scale.With this, the organisation can compete on price with the potential to earn higher whole profits. Cost reduction provides the focus for the orgaisations strategy. Competitive advantage is achieved by driving costs down. There is mode for lone(prenominal) one cost leader Firms that succeed in cost leadership have the by-line strengths access to capital to make big investment, design skills, high level of expertise in manufacturing process, effective distribution channels . EXAMPLES- RYANAIR, TOYOTA, TESCO, AND WALMART Cost leadership is often 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 service that offers unique an d entertaind 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 differentiation- differentiating products from competitiors, charging a higher price. an base differentiation on omage, durability, after-sales customer service/ needs strong RD 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 arrive at a chance of charging a premium price, demand for differentiated less elastic, above average profits, superfluous barriers to entry?Risks difficult to sustain, higher costs, risk of creating differences, comsumers may become too price sensitive, compititors who atta in 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 there 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