MBA

HCBA 3110: STRATEGIC MANAGEMENT:

GROUP FOUR

GENERIC STRATEGIES
GROUP FOUR

Jude Thaddaeus Muyoma

Jesca Ndosi
Achenga Doris Odit
Mary Isdory
Discuss the application of the three generic
strategies of; cost leadership, differentiation
and focus (Niche), clearly bringing out
circumstances in which one of them can be
applied
WHAT IS A GENERIC STRATEGY?

The term Generic strategies, as used in strategic

management refers to the means through which a firm
attempts to achieve a competitive advantage against
competitor companies products, goods and/ or services
within a given market scope.
The term Generic Strategies itself is derived from one of
Porters (1980) theories.
Porter, postulated that for a firm to remain competitive in a
given market, it either has to adapt three competitive
strategies or risk being outcompeted.
 THE THREE GENERIC STRATEGIES

Low-cost
leadership
overall low cost leadership in the industry

Differentiation
Special appeal to one or more groups of Focus
consumer or industrial buyers focusing unique products for varied customer groups
on their cost or differentiation concerns through differentiation
 PORTERS GENERIC STRATEGIES
6

Competitive Advantage
Lower Cost Differentiation

Broad 1. Cost 2. Differentiation

Target Leadership
Competitive Score
3 A. Cost Focus 3 B. Differentiation
Narrow Focus
Target
GENERIC STRATEGY #1
COST LEADERSHIP STRATEGY
Target: customers in most or all segments of an
industry based on offering the lowest price
What is Cost Leadership?
In the simplest terms, cost leadership means having the
lowest cost of operation in the industry.
By producing high volumes of standardized products, the
firm hopes to take advantage of economies of scale and
experience curve effects.
The product is often a basic no -frills product that is
produced at a relatively low cost and made available to a
very large customer base at an equally low cost.
 GENERIC STRATEGY #1
COST LEADERSHIP STRATEGY
What are the determinants for Successful Cost Leadership?
Organizational
Resources and Aptitudes Risks or Limitations
Requirements
-Sustained capital investment
and access to capital
-Strict control of costs. Technological change that
-Process engineering skills. I.e.
cancels out the experience
developing cheaper ways to
-Detailed and frequent control gained or investment made.
produce existing products.
reports.
-Imitation of strategy by
-Intense supervision of labouR
-Clearly defined organization competitors
and responsibilities.
-Access to cheap raw materials
-Inflation of costs that annuls the
-Incentives based on meeting previous price differential and
-Products designed for ease of
strict quantitative objectives increases COGs
manufacture

-Low cost of distribution system

 GENERIC STRATEGY #1
COST LEADERSHIP STRATEGY
Best Example of Cost leadership is in the Airline and Telecom
Industries eg. Fastjet, Jambojet, Ryanair, Halotel
GENERIC STRATEGY #2
DIFFERENTIATION STARTEGY
Target: customers in most or all segments based on
attributes other than price
What is Differentiation?
In Simple terms, differentiation implies uniqueness
Thus, the differentiation strategy is aimed at the creation of a
product or services that is perceived throughout its industry
as unique.
The company or business unit may then charge a premium
for its Product.
This specialty can be associated with design, brand image,
technology, features, dealers, network, or Customer
service.
 GENERIC STRATEGY #2
DIFFERENTIATION STARTEGY
What are the determinants for Successful Differentiation?
Organizational
Resources and Aptitudes Risks or Limitations
Requirements
--Significant aptitudes in
marketing and in product
-Coordination between the -Competitive levels of
engineering.
functions of R&D, product product prices, in
development and marketing. accordance with a
-Strong investment in R&D.
strategy of minimum
-Qualitative assessments and global cost.
-Prestige in quality and
incentives.
technology.
-The customers no longer
-Capacity for understanding the value the product's factors
-Full cooperation of the
market and how it changes. of differentiation.
distribution channels.
-Appropriate organisational -As the industry matures,
-Long tradition in the sector, or a
structure for stimulating and imitation reduces the
unique combination of aptitudes
rewarding creativity. perceived differentiation.
obtained in other business
GENERIC STRATEGY #2
DIFFERENTIATION STRATEGY
GENERIC STRATEGY #3
FOCUS / NICHE STRATEGY
In this strategy the firm concentrates on a select few target
markets.
It is hoped that by focusing your marketing efforts on one or
two narrow market segments and tailoring your marketing mix
to these specialized markets, you can better meet the needs of
that target market.
The firm typically looks to gain a competitive advantage through
effectiveness rather than efficiency. It is most suitable for
relatively small firms but can be used by any company.
GENERIC STRATEGY #3
FOCUS / NICHE STRATEGY
As a focus strategy it may be used to select
targets that are less vulnerable to substitutes or
where a competition is weakest to earn above -
average return on investment.
This strategy focuses on market segmentation as
it targets specialized market segments.
 GENERIC STRATEGY #3
FOCUS / NICHE STRATEGY
The focus strategy has two variants.
Cost Focus
Differentiation Focus

(a) Cost focus- a firm seeks a cost advantage in its target segment
(b)Differentiation focus -a firm seeks differentiation in its target
segment. Both variants of the focus strategy rest on differences
between a focuser's target segment and other segments in the
industry. The target segment s must either have buyers with unusual
needs or else the production and delivery system that best serves
the target segment must differ from that of other industry
segments.
 GENERIC STRATEGY #3
FOCUS / NICHE STRATEGY
What are the determinants for Successful Differentiation?

Organizational
Resources and Aptitudes Risks or Limitations
Requirements
-The differences in costs
compared with nonspecialized
-Resources and aptitudes of
-Flexible and efficient companies are so wide that the
special application and interest in
organisation structure. advantages of specialisation are
the company's area of operation.
eliminated.
-Corporate culture relevant and
-Dominance of the relevant
specific to its areas of -The market in which the
technology and of the
specialisation (products and company is specialized reduces its
engineering of the product.
markets). differences with respect to the
global market.
-Marketing capacity.
-Close coordination between
functions. -Rapid response to -Other competitors are
-Ability in the use of limited
changes in the environment. specialized in part of the market
resources.
of the already specialized
company.
 GENERIC STRATEGY #2
FOCUS / NICHE STRATEGY
LOCAL EXAMPLE:- Arusha Farmers Market, Masaai Market
CONCLUSION

Understanding a Firms generic strategy is particularly

important in the strategic planning process
A firm cannot formulate its grand strategies without
knowing what strategy to adapt
Therefore, knowing its generic strategy helps a firm to
know how to get to its ultimate goal, which is most often
reaching profitability.
 THE END!!
QUESTIONS OR COMMENTS?