Industry Analysis and Generic Competitive Strategies
Professor Michael Porter suggests that strategy formulation requires an analysis of the attractiveness of an industry and the company’s position within that industry. This analysis becomes the basis for formulating generic strategies.
Industry Analysis
In the analysis of the industry, Porter identified five forces: 1) the competition among companies (21 the threat of new companies entering the market. (3) the possibility of using substitute products or services, (4) the bargaining power of suppliers, and) 5 the bargaining porter of buyers or customers. On the basis of the industry analysis, a company may adopt generic strategies. These strategies are generic because they may be suitable on a broad level for different kind’s o organizations. Ark’ enterprise, however, may use more, than one strategy
Overall Cost Leadership Strategy
This strategic approach aims at reduction in costs, based to a great extent on experience. Thus, the emphasis ma)’ be on keeping a close watch on costs in areas such as research and development:, operation, sales, and service. The objective is for a company to have a low-cost structure compared with its competitors. This strategy often requires a large relative market share and cost-efficient operation, as illustrated by the low-cost Ivory soap sold in a broad market.
Differentiation Strategy
A company following a differentiation strategy attempts to offer something unique in the industry in terms of products or services. Porsche sports cars are indeed special; so is the Caterpillar Company, which is known for its prompt service and availability of spare parts. In the broad consumer market Dial soap is differentiated from other brands of ...