5
2.2
STRATEGY ACCORDING TO PORTER – GENERIC
STRATEGY
According
to
Michael
Porter
(1980),
there
are
three
ways
that
companies can achieve competitive advantage. He argues that in order
for a company
to achieve this advantage a firm should adopt one of the following strategies:
(a)
Cost Leadership
This
outlook
sees
the
business achieving
the
lowest
possible
cost
position
in
industry.
Through the
maintenance,
“average” quality
level the
firm is
able
to
command
average prices.
This type of strategy entails
“no
frills” product
and
aims
to
provide
the
basic
service
at
lowest
possible
cost
to the
customer
in
comparison to competitors.
(b)
Differentiation
This strategy allows firms to achieve competitive advantage by offering
higher
value
products
than
competitors.
The
emphasis
is
on segmenting
the
market
and
providing
highest
level
of value
to
them.
Targeting
specific
segments
can
be
costly,
and
this
must
offset
by
revenue
from sales
in
that
segment. In order to survive, firms must continuously improve existing
products to achieve competitive advantage.
(c)
Focus
The strategy focuses on a narrowly defined segment, geographical location or
product. Competitive advantage achieved by exploiting that segment. Smaller
firms usually practice this type of strategy.
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