Lecture Notes: Porter's Generic Strategies

Introduction

• Focus on strategic choice in marketing and business strategy.
• Discusses Michael Porter's work on generic strategies.
• Key challenge: Achieving competitive advantage in the market.

Competitive Advantage

• Defined as a sustainable advantage over competitors.
• A business must offer value that cannot be easily matched by competitors.
• Two main strategies identified by Porter:
  • Differentiation
  • Low Cost

Differentiation Strategy

• Focus on making products or services distinct from competitors.
• Customers perceive higher value and may be willing to pay more.
• Methods of differentiation include:
  • Superior quality and product benefits.
  • Distinctive branding.
  • Ease of purchase and distribution.
• Examples:
  • Apple: Product differentiation through brand loyalty.
  • Dyson: Innovation and brand building.
  • Premier Inn: Differentiated offering in a lower cost segment.
  • Luxury Brands: Differentiation based on quality.

Low Cost Strategy

• Objective: Become the lowest cost operator in the market.
• Achieved through economies of scale and efficiency.
• Suitable for products that require little differentiation or personalization.
• Examples:
  • Low-Cost Airlines: Achieving market leadership through cost structure.
  • Retailers: Offering lower prices than competitors.
  • Xiaomi: Low-cost smartphones in China.

Stuck in the Middle

• Businesses neither pursuing low cost nor differentiation risk competitive disadvantage.
• Examples of companies possibly "stuck in the middle":
  • McDonald's: Struggled in the US market.
  • Sony: Criticized for lacking differentiation.
  • Smiths and Morrisons: Retailers with market share challenges.

Hybrid Strategies

• Combining low cost and differentiation for a powerful approach.
• Example:
  • IKEA: Low-cost products with a differentiated design and localized product ranges.

Conclusion

• Porter's strategies highlight different ways to achieve and maintain competitive advantage.
• Businesses should aim for clarity in their strategic approach to avoid being "stuck in the middle."