Porter's Generic Strategies
Outpace and outsmart your rivals by picking the right strategy for your organization.
In order to be successful and make a profit in a competitive market, every organization needs a clear strategy.
But how do you decide on the best strategy for your business?
Should you offer a unique product or service, or the cheapest price? Should you focus on a niche market instead of a broad one?
The decision you make will impact every aspect of your organization, so it's important to get it right.
Porter's Generic Strategies can help you to make the best choice for your organization.
Michael Porter identifies three strategies for achieving competitive edge in his book, "Competitive Advantage: Creating and Sustaining Superior Performance."
These are Cost Leadership Strategy, Differentiation Strategy, and Focus Strategy.
Cost Leadership Strategy focuses on increasing profits by reducing operating costs and charging lower prices.
To implement this strategy successfully, you will need to be able to invest in new technology, and have efficient logistics. You must also make sure that your spending on items such as labor, materials and facilities is kept low.
It's essential that you beat your competitors on cost, so you'll need to continually monitor and reduce your costs.
The Differentiation Strategy focuses on making your product or service attractive and unique in comparison to those of your competitors.
For example, you might specialize in a particular feature or unique service, be renowned for your excellent customer service, or have a highly valued brand image.
You will need to be creative and innovative, and be able to provide high-quality products or services, for this strategy to work.
Sales and marketing also play a vital role in this strategy's success, and you'll need to make sure that you stay ahead of new trends in your industry.
The Focus Strategy concentrates on developing products or services for a niche market.
Using this strategy requires a deep understanding of your customers' needs.
Your aim will be to meet these needs by providing that special "something extra" that customers can't get anywhere else.
You'll also need to decide whether to adopt Cost Leadership or Differentiation. This is because the Focus Strategy is not normally enough to win substantial market share on its own.
Choosing the right strategy for your organization is crucial to gaining a competitive edge over your rivals.
By using Porter's Generic Strategies model, you'll be able to identify the strategy that you need to lead your organization to success.
You can find out more about Porter's Generic Strategies, including a step-by-step guide to using them, in the article that accompanies this video.