First 418 words of the document:
PORTERS GENERIC STRATEGIES
Michael Porter developed 3 models back in the 1980s' that are as relevant today as there were then.
This is one of them. Any student of Business Studies needs to understand it, especially if they are looking
at marketing, enterprise or innovation. The model is not specific to any exam board or university
syllabus. Of course copyright belongs to Michael Porter (1985) so please respect it. Hope it helps clarify
any confusion over it and where it fits in with other models.
1. When we talk about `target', we mean the size of the market.
2. When we talk of
3. The three types of strategy that exist according to Porter were cost leadership, differentiation
and focus. Later on focus was split into cost focus and differentiation focus.
4. You can analyse the competitive environment using Porters' 5 forces models (potential entrants,
buyer power, threat of substitutes, supplier bargaining power and competitive rivalry)
5. You can use Porters' generic strategy to develop a strategy to gain and improve competitive
6. One way to improve competitive advantage is through the value chain (one of Mr. Porters' other
So here's the model.
LOW COST HIGH COST
(PRODUCTS AND SERVICES (WHICH CREATES
ARE PITCHED AT THE LOWEST UNIQUENESS)
BROAD TARGET The generic strategy used is The generic strategy used is
called Cost Leadership called Differentiation
NARROW TARGET The generic strategy used is The generic strategy used is
called Cost Focus called Differentiation focus
Very Common Misconceptions:
1. `There is such a thing called leadership differentiation'. Nope sorry but your wrong. An
organisation may be a leader in using differentiation strategies; but nothing else.
2. `Take two pizza manufacturers each sells their products in high volume to a broad customer
base at low cost. One makes a pizza that the other one doesn't that's differentiation'. Oh dear
any teacher or tutor saying this needs to go back to university. If you have one pizza
manufacturer selling their products to a broad customer base at low cost they are using cost
leadership. If another pizza manufacturer sells their products to a broad customer base at high
cost they are using differentiation. Now, for example, if they decide to change the business focus
Free to use but please reference M. Porter correctly.