what is generic alternation.
Answers
Business management guru and author Michael Porter laid out his generic marketing strategies in his 1985 book "Competitive Advantage: Creating and Sustaining Superior Performance." Porter identified three broad strategies: Cost leadership, differentiation and focus, with focus subdivided into cost focus and differentiation focus.
Cost Leadership
The cost-leadership strategy is a good option for companies that are able to consistently reduce the costs of doing business. Maintaining low overhead costs and negotiating favorable acquisitions costs with suppliers are key to making this strategy work. You can apply cost leadership in one of two ways. You either generate higher profit margins by charging industry-average prices despite your low cost basis, or you pass the savings onto customers and build market share through high sales volume.
Differentiation
A differentiation strategy is a better alternative for a company that doesn't have strong cost advantages or prefers to emphasize strengths in production or resale. The key to this approach is to research customer needs, design and develop quality products or service proceeds to match and effectively market and sell solutions by stressing the differences from competing brands. Product quality, elite service, unique features and environmental responsibility are common ways to separate yourself with a differentiated approach.
Cost Focus
In general, the focus strategy is distinct because it is used when you serve a niche target market. The cost-focus approach means you use the principles of a low-cost operation to market affordability to a niche market. In the supermarket category, for instance, German chain Aldi's drives business from lower- to middle-income buyers by maintaining a very low-cost operation. This enables them to offer low prices to the most budget-conscious grocery shoppers.
Differentiation Focus
A differentiated-focus approach means you market a bigger or better solution to a smaller market segment. Local businesses commonly rely on this strategy when competing against larger box retailers. A small electronics retailer, for instance, could promote the best selection of high-tech products or the most knowledgeable service staff as a way to attract business from general-merchandise retailers and discount stores. This strategy offers a way to build strong loyalty since you focus specifically on the needs of a select group of customers.
References (2)
Mind Tools: Porter's Generic Strategies
Quick MBA: Porter's Generic Strategies
About the Author
Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.
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