Intensive strategies are used to support organizational growth. On the other hand, a generic strategy defines the general approach used for business competitiveness.
The firm sells its products either at average industry prices to earn a profit higher than that of rivals, or below the average industry prices to gain market share.
In the event of a price war, the firm can maintain some profitability while the competition suffers losses. Even without a price war, as the industry matures and prices decline, the firms that can produce more cheaply will remain profitable for a longer period of time.
The cost leadership strategy usually targets a broad market.
Some of the ways that firms acquire cost advantages are by improving process efficiencies, gaining unique access to a large source of lower cost materials, making optimal outsourcing and vertical integration decisions, or avoiding some costs altogether.
If competing firms are unable to lower their costs by a similar amount, the firm may be able to sustain a competitive advantage based on cost leadership. Firms that succeed in cost leadership often have the following internal strengths: Access to the capital required to make a significant investment in production assets; this investment represents a barrier to entry that many firms may not overcome.
Skill in designing products for efficient manufacturing, for example, having a small component count to shorten the assembly process. High level of expertise in manufacturing process engineering. Each generic strategy has its risks, including the low-cost strategy.
Bmw A Strategic Review Marketing Essay. Print Reference this. Disclaimer: Porter’s Generic Strategies, which is shown in figure#2. BMW followed Cost Leadership and Differentiation strategies, which we will be discussing one by one. In automobile industry and in BMW organization in particular, economies of scale are very important . Porter's Generic Competitive Strategies (ways of competing) 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. Toyota Motor Corporation’s generic strategy (Porter’s model) and intensive growth strategies are discussed in this case study and analysis on the business.
For example, other firms may be able to lower their costs as well. As technology improves, the competition may be able to leapfrog the production capabilities, thus eliminating the competitive advantage.
Additionally, several firms following a focus strategy and targeting various narrow markets may be able to achieve an even lower cost within their segments and as a group gain significant market share. Differentiation Strategy A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition.
The value added by the uniqueness of the product may allow the firm to charge a premium price for it.
The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product. Because of the product's unique attributes, if suppliers increase their prices the firm may be able to pass along the costs to its customers who cannot find substitute products easily.
Firms that succeed in a differentiation strategy often have the following internal strengths: Access to leading scientific research. Highly skilled and creative product development team. Strong sales team with the ability to successfully communicate the perceived strengths of the product.
Corporate reputation for quality and innovation. The risks associated with a differentiation strategy include imitation by competitors and changes in customer tastes. Additionally, various firms pursuing focus strategies may be able to achieve even greater differentiation in their market segments.For example, the automobile sector, in formulating a strategy must attempt to cut costs at every step of their value chain, whether it is using word of mouth over advertisements or engaging in vertical integration strategies in an attempt to control costs.
Michael Porter’s Generic Strategies According to Porter, the marketing manager. Porter's Generic Strategies. If the primary determinant of a firm's profitability is the attractiveness of the industry in which it operates, an important secondary determinant is its position within that industry.
Ford Motor Company’s generic strategy (Porter’s model) and intensive growth strategies support the firm’s competitive advantage. (Photo: Public Domain) Ford Motor Company’s market position as the fifth biggest automobile manufacturer in the world is supported through the firm’s intensive growth strategies aligned to its generic.
Toyota’s generic strategy determines the company’s overall approach in the global automotive benjaminpohle.com intensive growth strategies are applied to ensure Toyota’s continued growth in markets worldwide.
Toyota’s Generic Strategy (Porter’s Model). Quick MBA: Porter’s Generic Strategies; Open Learning World: Integrated Cost Leadership-Differentiation Strategy Griffin, Dana. "Four Generic Strategies That Strategic Business Units Use.
Critique of generic strategies and their limitations, including Porter - "Generic strategies: a substitute for thinking?" Orcullo, Jr., N.
A., Fundamentals of Strategic Management References [ edit ].