Porter Generic Stratey

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The Porter Generic Strategy framework enables an organisation to check the logic of its current competitive strategy and if necessary- the organisation can look for a new strategy •COMPETITIVE ADVANTAGE- the ability for a company to add more value for its customers than its rivals (therefore hold a position of relative advantage)….. The key drivers of competitive advantage are cost leadership and differentiation product •COMPETITIVE STRATEGY- the means by which an organisation seeks to achieve and sustain a competitive advantage…… Porter suggests that competitive strategy means taking an offensive or defensive action to create a defendable position to cope with the competitive forces- this would lead to greater returns •Porter suggests that a firm’s strengths fall into two headngs; cost advantage and differentiation. By applying these strengths in a broad or narrow focus, three generic strategies result: COST LEADERSHIP, DIFFERENTIATION AND FOCUS……they are generic because they are not specific to a firm or industry. •4 strategies to gain a competitive advantage: COST LEADERSHIP-(superior profits through lower costs), DIFFERENTIATION-(higher profits by adding value the products areas that are of real significance for customers who are willing to pay a premium price), FOCUS STRATEGY-(concentrate on a specific area on the market)

COST LEADERSHIP- concentrates on becoming the lowest cost producer through economies of scale. With this, the organisation can compete on price with the potential to earn higher unit profits. Cost reduction provides the focus for the orgaisations strategy. Competitive advantage is achieved by driving costs down. There is room for only one cost leader •Firms that succeed in cost leadership have the following strengths: access to capital to make big investment, design skills, high level of expertise in manufacturing process, efficient distribution channels …. EXAMPLES- RYANAIR, TOYOTA, TESCO, AND WALMART •Cost leadership is...
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