Q.

10 Explain the Framework of Porter’s Generic Strategies, with appropriate industry

examples ?
Porter wrote in 1980 that strategy targets either cost leadership, differentiation,
focus.Porter called the generic strategies "Cost Leadership" (no frills),
"Differentiation" (creating uniquely desirable products and services) and "Focus"
(offering a specialized service in a niche market)These are known as Porter's three
generic strategies and can be applied to any size or form of business. Porter claimed
that a company must only choose one of the three or risk that the business would
waste precious resources. Porter's generic strategies detail the interaction between cost
minimization strategies, product differentiation strategies, and market focus strategies
of firms

 Cost leadership

As its name might imply, cost leadership allows a competitive edge by manipulating
production costs. It does by charging lower prices to increase market share. This is
done by casting the company as a low-cost alternative, which increases both sales and
the company’s profile and Reducing costs to increase profits. With fewer expenses on
the books, organizations can move money into other avenues, like salaries or product
research.

Just how do companies go about implementing the Cost Leadership strategy? It often
depends on the specifics of their given industry. Many business ventures will have
access to capital for investing in technology and infrastructure. These kinds of
adjustments and innovations help businesses bring down costs. It also helps to
minimize the standard operating expenses. As an extension of that, proper logistics
are crucial. Companies must be able to effectively manage the flow of products
between the point of creation and respective storefronts.

The greatest risk in pursuing a Cost Leadership strategy is that these sources of cost
reduction are not unique to you, and that other competitors copy your cost reduction
strategies. This is why it's important to continuously find ways of reducing every cost.

One real-world business who has championed Cost Leadership is Wal-Mart. The
conglomerate has built its model partly on low prices, continually promising to beat
those of its competitors. Executives are able to do that because Wal-Mart has an
especially efficient supply chain, often sourcing products from less expensive foreign
markets. Another is India’s largest steel company Tata Steel, the cost leader in the
steel manufacturing sector Cost of raw material in India is much cheaper when
compared to other countries; specially China India also has the cheapest labor costs
for a company. Although, Brazil and South Africa have cheaper raw material cost,
they have a higher labor cost to compensate. TATA Steel has access to one of the
cheapest labor markets and hence is in a very strong position in minimizing its cost of
production

 Differentiation

Price is an important consideration while it comes to attracting customers. However,

the Differentiation method looks to develop product uniqueness and attractiveness to
engage customers. Once again, there are a number of concepts involved in this
approach, and each one is all about playing to customers’ perceptions. That might
include promoting a product’s durability and general utility, innovative which appeals
to a customer’s sense of value. It could also involve touting the support system for a
service or product, which creates a certain air of accountability. Finally, there is also
the notion of brand image, creating meaningful connections with customers to
ensure long-term loyalty. Companies that differentiate want to meet customers’
unique needs, and are rewarded with premium prices.To properly implement the
Differentiation strategy, a company needs the following:

Marketing and promotions teams. These individuals are on the front lines of defining
a brand and emphasizing its uniqueness.

Delivering high-quality products. Customers won’t stay loyal if the reality doesn’t
meet the company’s promises.

Ongoing research and innovation. Only by pushing technological boundaries can a

company hope to maintain relevancy.

One of the more successful examples of the Differentiation approach is McDonald’s.

Over the years, the fast food giant has used technology and research to gain
consistently loyal customers, including efforts to reduce wait times and marketing
directly to children .The another examples Philips company which also give
innovative product to its customers another example are Titan Watches
have made available to the Indian consumer products that have an international look,
carry the image of premium quality and therefore are able to set their prices higher
than their competitors in the Indian watch market. Timex Watches in India faced with
the absolutely dominant position of Titan Watches in the Indian-watch market,
launched a complete range of Plastic watches that offered a refreshing product
alternative to the market particularly to the youth market ( 18 to 35 age group) and
was able to achieve staggering sales volume of 2 million watches in just two years,- a
figure that the market leader took more than five years to reach in considerably less
competitive conditions

 Focus

In many ways, both Cost Leadership and Differentiation are all about appealing to the
widest customer base possible. The Focus approach, however, eschews mass appeal,
instead layering efforts toward one niche market. Companies who choose to adopt this
strategy are taking a deliberate risk. On the one hand, by engaging a specific
demographic – many of which are often undeserved the company is able to captivate
an increasingly loyal pool of consumers. Within the Focus strategy, there are two
distinct variants:

Cost Focus: Here, companies are looking to find a cost advantage in their intended
market segment.

Differentiation Focus: These companies work to find as unique of a market as

possible in order to maximize efforts.

Regardless of the specific variant, Focus is all about balancing the relationship
between production costs and delivery. Cost Focus intends to find those markets
where costs are optimal, while Cost Differentiation emphasizes the buyer’s unique
needs.

PepsiCo is among the largest consumer packaged goods companies in the U.S. It
achieved this by absorbing a number of smaller companies that helped it develop an
edge in the beverage industry. The company’s subsidiaries include Tropicana, Naked
Juice, Frito-Lay and the South Beach Beverage Company.

Other strategies exist beyond Porter’s, but his provide the foundation on which many
others are built. By investigating these three strategies accompanied by real-world
examples, it becomes evident that no one strategy is better than another. Every
company must look at the entire market from their unique perspective to choose an
appealing market segment for its product and decide the most effective way to
dominate that market.