Generic Strategies of Michael Porter is a set of competitive strategies that are aimed to the general development of a business.
These strategies proposed by Michael Porter looking to gain a competitive advantage for the company, either through cost leadership, differentiation or focus.
Cost leadership
This strategy is to sell products at very low unit through a reduction in costs.
Cost reduction is achieved, for example, through the production of standard products through volume production, use of economies of scale, efficient use of raw material supplies, use of new technologies, stringent cost controls and overhead, creating a culture of cost reduction in employees, reduced costs of sales, marketing and advertising, etc.
Through the strategy of cost leadership, the company seeks to gain greater market share and thus increase their sales and may even, to have lower prices than the competition, some competitors out of the market.
The cost leadership strategy is recommended for use in mass market when the market is made up of consumers who are sensitive to prices when there are few opportunities for differences between the products, when consumers do not care to the differences between and other brand.
The disadvantages of using this strategy are that could be imitated by competitors, or that the interests of consumers could be directed to other features of the product, not just price.
Differentiation
This strategy is to produce or sell a product that is unique and original, apart from the competition achieved, and not easily imitable by it.
There may be differentiation, for example, product design, in its attributes or characteristics, the brand, quality, service, or provide good customer service, to offer additional services, the speed of delivery, etc. .
Through the differentiation strategy, the company seeks to consumer preference, and may even raise prices, if they recognize the distinguishing features of the product.
The differentiation strategy is recommended when the market is comprised of consumers who are insensitive to prices.
The disadvantage of using this strategy is that the competition can get to copy the distinguishing features of the product, so that using this strategy, these distinguishing features should be difficult to imitate by competitors.
Approach
This strategy is to focus or concentrate attention on a specific market segment, i.e. to concentrate on producing or selling products that meet the needs and tastes of a particular group of consumers.
The strategy seeks to focus the company specializes in a particular type of consumer and therefore to become more efficient, for example, by offering products that meet their specific needs or preferences, or to design strategies that take advantage of its features.
The focus strategy is recommended when the market is large, when consumers have different needs and preferences when no competitors are targeting the same market segment.
The disadvantage of using this strategy is that competitors can identify the advantages of the segment to which the company is going, and decide to imitate, that consumer preferences are directed to product characteristics desired by the market in general, that has made a bad segmentation, and is missing the opportunity to serve other markets.
