Porter's Generic Strategy

Porter’s Generic Strategies

Every entrepreneur needs a game plan, a strategy to start their business; there are a few basic approaches, introduced by Michael Porter in 1985.

Porter's generic strategies are targeted towards gaining competitive advantage, developing the "edge" that gives you a heads up on sales that makes you better than your competitors. There are three main strategies he focuses on that help us achieve this competitive advantage;

The Cost Leadership Strategy

This strategy focuses on the aspect of price; here one can decrease the price of their product without compromising on the quality and gain an advantage over them.

The formation a competitive edge is the primary advantage of adopting the cost leadership strategy. Another potential advantage is the development of economies of scale. It is basically how businesses optimize profits by upsizing their operations while pursuing greater efficiency.

On the other hand, one of the disadvantages of this strategy is that excessive competition may lead to price wars i.e. when competitors are willing to lower their profits in order to gain competitive advantage. Which may result in the reduction of innovation and it may also lead to loss of diversity for consumers in availability of commodities.

The Differentiation Strategy

This concept elucidates the factor of individuality; how one makes its product better, different or more attractive than its competitors.

With the correct implementation of this strategy the company will be able to charge extra or increase the prices of their commodities the company will be able to do so confidently because with this strategy it would have developed a strong corporate identity, a brand image and lack of substitute or alternative products on the market; also having a loyal consumer base helps in stabilizing revenue and lessens the impact of situations such as market crashes.

One major downside of this strategy is the possibility of imitation of the unique commodity by a competitor i.e. competitors may copy business strategies and steal away customers.

The Focus Strategy

When companies use Focus strategies; they concentrate on particular niche markets by understanding the working and function of that market and the specific needs of customers within it, keeping this entire situation in mind the businessmen then develop uniquely inexpensive or specific products for the market they target.

One of the advantages of using a focus strategy is that firms develop tremendous expertise about the commodities they provide. In markets where product knowledge is important, competitors and newly established companies may find it difficult to compete with companies following