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Porter’s generic strategies

In his research, Michael Porter (2004) identified four ‘generic’ business strategies that could be adopted in order to allow an organisation to gain a competitive advantage.

They are referred to as generic strategies as they can be applied to products and services across all industries and in small, medium-sized and large organisations.

Porter’s four generic strategies relate to the extent to which the operation of a business’ activities are considered narrow or broad, and the extent to which a business seeks to differentiate its products from those of its competitors.

Porter starts by recognising that the key strategic challenge for most organisations is to identify the optimum way in which to identify, produce and deliver a ‘competitive advantage’ over its rivals, which can be sustained year on year.

A competitive advantage is seen as an advantage over competitors and rivals in a given market, which is gained by offering consumers and users greater value in some way. This can be achieved, for example, by offering either lower prices or a ‘better’ product that leads to a different price being charged.

The key is for an organisation to identify and sustain its niche in the market in which it operates.

These strategies identified were:

  • Cost leadership (cheap, no expenses)
  • Differentiation (unique or premium products)
  • Focus (a specialised service or market). Focus is then divided into two different strategies:
    • Differentiation focus (unique strategy differentiation in a focused market)
    • Cost focus (lower costs in a focused market)

Porter depicted these ideas as follows:

Figure depicting the strategies as described above

(Businessballs 2019)

Your task

Find an example of a construction organisation that fits into each of Porter’s four categories.

You can achieve your answer by undertaking an internet-based research exercise (don’t forget to include your sources of information in your answer) and/or by viewing the video ‘Porter’s Generic Strategies – simplest explanation with examples’.

This is an additional video, hosted on YouTube.

In the course of your research, see whether you can also identify and explain the Porter concept of ‘stuck in the middle’.

Post your answers in the comments.

References

Businessballs (2019) Porter’s Generic (Competitive) Strategies [online] available from https://www.businessballs.com/strategy-innovation/porters-generic-competitive-strategies/ [29 September 2019]

Porter, M. E. (2004) Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York; London: Free Press

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This article is from the free online course:

Business Strategy: The Art of Looking into the Future

Coventry University