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08 Jan 07

Porter generic strategies - Wikipedia, the free encyclopedia

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business toolkit porter strategy

Market segmentation is narrow in scope while both cost leadership and differentiation are relatively broad in market scope.
Strategic strength is a supply-side dimension and looks at the strength or core competency of the firm
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- "
  value disciplines
  >" that can create customer value and provide a competitive advantage. They are operational excellence, product innovation, and customer intimacy
- competitive advantage through effectiveness rather than efficiency.
- attract highly skilled, creative people
- communicate the importance of the differentiating product characteristics
- etter meet the needs of that target market.
- also called a focus strategy or niche strategy
- Segmentation Strategy
  
  In this strategy the firm concentrates on a select few target markets
- continuous improvement and innovation
- tend to be more brand loyal.
- creating a product that is perceived as unique.
- considerable market share advantage or preferential access to raw materials, components, labour, or some other important input.
- Promotional strategy often involves trying to make a virtue out of low cost product features.
- Examples include low-cost airlines such as EasyJet and Southwest Airlines, and supermarkets such as KwikSave.
- Maintaining this strategy requires a continuous search for cost reductions in all aspects of the business
- Combining multiple strategies is successful in only one case. Combining a market segmentation strategy with a product differentiation strategy is an effective way of matching your firm’s product strategy (supply side) to the characteristics of your target market segments (demand side). But combinations like cost leadership with product differentiation are hard (but not impossible) to implement due to the potential for conflict between cost minimization and the additional cost of value-added differentiation.
- no-frills product that is produced at a relatively low cost and made available to a very large customer base.
- low cost strategy is rarely able to provide a sustainable competitive advantage. In most cases firms end up in price wars. Instead, they claim a best cost strategy is preferred. This involves providing the best value for a relatively low price
- hree best strategies. They are cost leadership, differentiation, and market segmentation (or focus).