Generic Business Strategies Management YouTube Lecture Handouts

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Generic Business Strategies Management
Generic Business Strategies

Concept

  • The word “strategy” is derived from the Greek word “stratçgos;” stratus (meaning army) and “ago” (meaning moving)
  • Henry Mintzberg, in his 1994 book, The Rise and Fall of Strategic Planning, points out that people use “strategy” in several different ways, the most common being these four:
    • Strategy is a plan, a “how,” a means of getting from here to there.
    • Strategy is a pattern in actions over time; for example, a company that regularly markets very expensive products is using a “high end” strategy.
    • Strategy is position; that is, it reflects decisions to offer particular products or services in particular markets.
    • Strategy is perspective, that is, vision and direction.

According to Michael Porter

  • In a 1996 Harvard Business Review article and in an earlier book, Porter argues that competitive strategy is “about being different.” He adds, “It means deliberately choosing a different set of activities to deliver a unique mix of value.”
  • In short, Porter argues that strategy is about competitive position, about differentiating yourself in the eyes of the customer, about adding value through a mix of activities different from those used by competitors.
  • These were given by Harvard Business School Professor Michael Porter in his book, “Competitive Strategy” published in the year 1980
  • Porter called these generic strategic specifically made to gain competitive advantage in the market. So, he has basically linked strategy with following something unique to gain an edge over the competitors.

Types

  • Cost Leadership Strategy: When the company decides to sell its products at a lowest price and thus become a leader of cost in market.
    • For example: If a company decides to sell its smart phone at a lowest price to become a cost leader, then it is said to be following a cost leadership strategy. Due to this it will gain a leadership in cost and therefore will be sold most in a specific category of the products
  • Differentiation Strategy: When the company decides to sell a unique product in market so that it can be differentiated from other products, it is said to be following a differentiation strategy.
    • For example: Apple iPhone is a Unique smart phone and therefore follows differentiation strategy. This has helped It in charging it a higher price and thereby recovering the cost by even selling a smaller quantity.
  • Cost Focus Strategy: When a firm decides to sell low-cost products but in narrow segment, it is called focus strategy. For example, if I decide to sell healthy drink for certain disease patient at a low cost. It has targeted a narrow segment with a lowest price
  • Differentiation Focus Strategy: Here the firm sells unique products but again in a narrow segment. It can be a smart watch for women at a higher price but of course the quality being top class
Differentiation Focus Strategy

MCQs

Generic Strategies are made for?

1. Delivering value to customer

2. Increasing brand loyalty

3. Building brand image

4. None of the above

If a company sells unique products but for a narrow segment, it is called?

1. Cost leadership

2. Focus cost leadership

3. Focus differentiation

4. None of the above

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