The Discipline of Market Leaders Customer Value Model

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The Discipline of Market Leaders Customer Value Model
(Porter’s generic strategies with particular reference to Apple Inc)
Table of contents
Introduction…………………………………………………………………………………………………. Porter’s three Generic Competitive Strategies…………………………………………………………. Cost Leadership…………………………………………………………………………………………… Differentiation………………………………………………………………………………………………. Focus or Niche strategy…………………………………………………………………………………... Apple Inc……………………………………………………………………………………………………. Identification and Critical Evaluation of the Company’s Existing Strategies………………………… Apple Inc Cost leadership Strategy……………………………………………………………………… Apple Inc Differentiation Strategy………………………………………………………………………... Apple Inc Focus or Niche Strategy………………………………………………………………………. Conclusion………………………………………………………………………………………………….. References………………………………………………………………………………………………….

1.0 Introduction
A firm's relative position within its industry determines whether a firm's profitability is above or below the industry average. The fundamental basis of above average profitability in the long run is sustainable competitive advantage. There are two basic types of competitive advantage a firm can possess: low cost or differentiation. The two basic types of competitive advantage combined with the scope of activities for which a firm seeks to achieve them, lead to three generic strategies for achieving above average performance in an industry: cost leadership, differentiation, and focus. The focus strategy has two variants, cost focus and differentiation focus. Michael Porter suggested that businesses can secure a sustainable competitive advantage by adopting one of three generic strategies. According to Michael E. Porter's description of the five forces of competition, companies can raise their profitability by placing their activities in markets or industries with a low degree of competition. By doing so, the company will potentially develop a large market-share and great profits. However, companies also have a second opportunity to generate profitability. Companies can optimize their position within a certain industry, and thereby obtain great profits - even if the industry in general may have below-average profitability. Therefore, it is claimed that companies, if they position their products or services effectively, may be able to generate great profits, even if the industry is generally crowded with players all wanting a piece of the pie. Michael E. Porter proposes that companies have the opportunity to position their products or services by either costs or differentiation, and that this positioning can be applied to either a narrow or a broad scope of buyers. This results in three generic strategies, which are called Cost Leadership Strategy, Differentiation Strategy and Focus Strategy. These strategies can be applied at the business unit level, and are as such generic, because they are not firm or industry dependent. Therefore, each company may adopt one of these strategies to obtain greater profits, even though other players in the industry pursue completely other strategies. If a company wishes to pursue the strategy of cost leadership, it has to be the low cost producer (Porter, 1980). A firm may gain cost advantage through economies of scale, proprietary technology, cheap raw material, etc.  Organizations that achieve cost leadership can benefit either by gaining market share through lowering prices (whilst maintaining profitability,) or by maintaining average prices and therefore increasing profits (Porter, 1980).  All of this is achieved by reducing costs to a level below those of the organization’s competitors.   

The strategy of differentiation involves offering a different product, a different delivery system, or using a different marketing approach (Porter, 1980).  And it is up to the management of the company to decide which factors it wants to emphasize in order to gain competitive...
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