Generic Strategies

Many planning experts believe that the general philosophy of doing business declared by the firm in mission statement must be translated into a holistic statement of the firms strategic orientation before it can be further defined in terms of a specific long term strategy. In other words a long term or a grand strategy must be based on the core idea about how the firm can best compete in the market place.

The popular name for this core idea is Generic Strategy. From a scheme developed by Michael Porter, many planners believe that any long term strategy should derive from a firms attempt to seek a competitive advantage based on three generic strategies:
Striving for over-all low cost leadership in the industry. Striving to create and market unique products for varied customer groups through differentiation. Striving to have special appeal to one or more groups of customers or industrial buyers, focusing on their cost or differentiation concerns.

Advocates of generic strategies believe that each of these options can produce above average returns for a firm. However they are successful for very different reasons. Low cost leaders depend on some fairly unique capabilities to achieve and sustain their low-cost position. Low cost producers usually excel at cost reductions and efficiencies. A low cost leader is able to use its cost advantage to charge lower prices or to enjoy higher profit margins. By doing so, the firm can effectively defend itself in price wars, attack competitors on price to gain market share, or if already dominant in the industry, simply benefit from exceptional returns.

Strategies dependent on differentiation are designed to appeal to customers with a special sensitivity for a particular product attribute. By stressing the attribute above other product qualities, the firm attempts to build customer loyalty. Often such loyalty translates into a firms ability to charge a premium price for its product. A focus strategy, whether anchored in a low cost base or differentiation base attempts to attend to the needs of a particular market segment.

Requirements for Generic Competitive Strategies Commonly required skills and resources
Sustained capital investment and access to capital. Process engineering skills, intense supervision of labour. Products designed for ease to manufacture. Low-cost distribution system Strong market abilities. Product engineering. Creative flare. Strong capability in basic research. Corporate reputation for quality or technological leadership. Strong cooperation from channels. Combination of the above policies directed at the particular strategic target.

Generic Strategies

Common Organizational requirements

Tight cost control structured organization and responsibilities. Incentives based on meeting strict quantitative targets.

Overall cost leadership

Differentiation

Strong coordination among functions in R&D product development and marketing. Subjective measurement and incentives instead of quantitative measures. Amenities to attract high skilled labour. Combination of the above policies directed at the regular strategic targets.

Focus

A PRESENTATION BY:
SRI S.B SHARAN