The three genetic strategies were developed by Michael Porter to help a company gain a competitive advantage. A relative position of a company in its industry defines if the profitability of the firm is above or below the average of the industry. The genetic strategies are tools a company can use with products and services from across all industries and organizations of all sizes. The three genetic strategies are cost leadership, differentiation and focus. The main aim of this study is to discuss and differentiate Michael Porter’s three genetic strategies.
The cost leadership strategy is one that facilitates a company gaining a competitive advantage in the industry because of the associated low production costs of the products and services. The low costs are not in any way to mean the company will offer products or services at the least prices. The expenses are eliminated from every source of the operation chain ranging from the production, promotion, and purchases among others. The goods can be given a price falling in a competitive parity but due to the low production costs, the firm will manage itself through the low season and invest more throughout. A producer with low-costs needs to define and apply all the available means of cost advantage. If a firm attains and holds a cost leadership, it will fall into the category of the industry above average companies provided the prices will be commanded around the fair price of the industry.
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Differentiation is a strategy involving the development of various goods for different classes. Different goods, which have been branded differently, and marketed in different approaches within the functional levels gives business opportunities to desensitize costs, and on the foundation of being unique, they charge a higher price. The technique is also known to provide an advantage to various markets and goods life cycles and in the process facilitates an even cash flow in case of the product decline as others mature up. Usually while using the differentiation strategy, a business seeks typically to be unique in its industry with some approaches that are valued by different buyers and thus, selects an attribute or more attributes that buyers in the industry regard as essential and position itself in a unique manner to meet these needs ( Prasad, 2015 ).
The focus strategy is where a company concentrates on a narrow segment of the industry, also known as the ‘niche’ category. A business in a niche market is known to have understandable consumers, who appreciate and are willing to pay higher for their indulgence. A competitive edge is created purposely for a niche either through cost or differentiation. The risks, however, are that the niche may not develop or it may get lost with time and transform. The two variants depending on the differences between the target segments of the company and the segments of the industry. These segments need to have buyers within the ordinary demands or the in the production and delivery approaches serving the target to the maximum must differ from all the other industry segments.
The choice of what generic strategy should be used is known to underpin each of the other strategic decisions one has to make and thus, there is a need to spend the time to be able to get the right one. There are risks when one tries to use more than one generic strategy because the elements required in each of the strategies make them appeal to different customers.
References
Prasad, K. (2015). Strategic management . Place of publication not identified: Prentice-Hall Of India.
