Identify the ways to achieve competitive advantage based on lower costs.
Generic and Corporate Strategies. Learn the three generic strategies used for building competitive advantage and delivering value to customers. Learn why and how companies diversify and how diversification can deliver competitive advantage.
Objectives:
- Understand what distinguishes each of the three generic strategies and why some of these strategies work better in certain industries and competitive conditions.
- Identify the ways to achieve competitive advantage based on lower costs.
- Identify ways to develop competitive advantage based on differentiation.
- Identify ways to develop competitive advantage based on focus.
- Understand when and how diversifying into multiple businesses can enhance shareholder value.
- Understand how related diversification strategies can produce competitive advantage.
Introduction
A company’s competitive strategy is management’s plan for competing successfully. The chances are remote that any two companies—even those in the same industry—will employ the exact same competitive strategy. However, Michael Porter developed three generic competitive strategies, which can be used singly or in combination, that consist of whether a company’s target market is broad or narrow and whether the company is pursuing a competitive advantage related to lower costs or differentiation (Porter, 1996). “Porter states that the strategies are generic because they are applicable to a large variety of situations and contexts…. The generic strategies provide direction for firms in designing incentive systems, control procedures, and organizational arrangements” (“Generic competitive strategies,” 2009).
