In the article "Generic Strategies", the world-renowned master of competitive strategy, Michael Porter, pilots the reader through a macro-level guide to the three chief mechanisms that a company can use to achieve that elusive business world goal: Sustainable competitive advantage. Porter exalts that companies are essentially faced with a mutually exclusive decision in terms of broad level strategy. Deciding between more than one broad or generic strategy significantly increases the risk that the company will end up "stuck in the middle" or doomed to strategic mediocrity.
In essence, a company can strive to be the low cost producing leader or differentiator across the breadth of the industry, or target a narrow industry segment and commit to one of the two above paths. Porter is quick to caution that an effort to simultaneously achieve more than one of these alternatives is an arduous and cumbersome task. Often times the perception, or brand of the company may become misconstrued in the marketplace. The cost leadership theory involves a direct focus on slimming down the firm's cost structure; usually at the expensive of product creativity. These companies primarily possess standardized products in perhaps a commoditized market structure. Parity and proximity must be achieved in terms of differentiation for these companies. Likewise, differentiation can be achieved through product lines, technology, or even distribution channels. Opposite cost leadership, parity and proximity are established from a cost perspective. Then focus strategy employs the same notion of intent, only capitalizing on fragmentation noted in particular industry and market segments.
From the highest level imaginable, the insight Porter offers gives a broad sense of strategic direction. It gives firms an outstanding starting point in how to set and guide their corporate vision. However, as the article indicates, these strategies are extremely generic in nature and offer only a 500,000 foot...
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