Porter’s generic strategy is a three dimensional strategy composed of three quadrants or sometimes four depending on how the matrix is drawn the name are differentiation, cost leadership and focus. or the lower quadrant can have cost focus and differentiation focus
Strategic Advantage: uniqueness perceived by customers and low cost position
Strategic Target: Industry wide and particular segment only
Porter’s generic strategies focus on the competitive advantage of a company. It can be used on businesses of all size and company can have a choice of one or two types which can be applied to their competitive advantage strategy.
A compagny can use the low cost strategy meaning prices lower than its competitors or the industry wide or by differientiating itself with quality, goods or services hence can charge higher prices. Also differientiating itself by customers command either lower prices or higher prices. Another way a company can differientiating itself is by offering their products or services to a selected segment of the market or industry-wide offering it products or services to many segnments of many markets.
The generic strategy reflect the choice made regarding both types of competitive advantage and scope. the scope of the market refers to three types of markets which are:
High-end market where high quality products and services lays hence the prices is higher for the products or services. The market is mainly for high income bracket customers who demand higher quality goods and services and are prepare to pay the prices for higher quality good and services and also lies in the industry-wide quadrant.
The next market is the regular market where reasonnable quality products or services lays usually generic products accessible by many working class customers and is about 80% of the markets hence low-cost and regular prices lays, also lies in the industry-wide quadrant.
the third market is the second-hand / low cost market where low quality product or cheap products and services lays and drive lower prices and is access by customer with a low income bracket who are prepared to pay low prices for the product or services they access and also lies in the industry-wide quadrant.
In the three markets type a company can differentiate itself from is competitors by segmenting their markets and focusing on one or two type of the above strategies by choosing which market a company want to provide their products or services.
Porter's Value Chain
The value chain, first defined by Michael Porter, contains a series of activities that work together to bring value to the organisation. Value in this sense can best be defined by what a product or service is perceived to be worth over and above what that product or service costs to produce and bring to the end user or customer. Value then is the profit margin for a company, and the delight of a customer in receiving or possessing it.
The activities of the value chain are broken down into primary and supporting activities. The primary activities are what actually go into the production of a product or those items that make a service available to a customer.
Porter, argue that the primary activities are inbound logistics, operations, outbound logistics, marketing and sales and customer service. The supporting activities are those activities that, though not to be directly associated with the production of a product or creation of a service but are necessary to make the primary activities possible and to allow the primary activities to create optimum value.
The supporting activities comprises of the company infrastructure, human resource management, technology development, and procurement.
Porter’s Value Chain diagram
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