PORTERS GENERIC

STRATEGIES MODEL

About Michael Porter

Professor of Harvard business school.
He is a leading authority on competitive

strategy & the competitiveness and

economic development of nations, states
& regions.
He is the author of 18 books & numerous
articles including Competitive Strategy,
Competitive Advantage, Competitive
Advantage of Nation & On Competition.
A sixth-time winner of the McKinsey award for
the best harvard business review article of the

The rationale behind

studying competition

Today, companies face their toughest

competition ever.
Companies use their understanding to design
market offers to deliver more value than the
offers of competitors seeking to win the same
customers.
Companies must also understand their
competitors, identify and analyze their strategies
to position themselves in such a way as to gain
the greatest possible competitive advantage
against competitors in the marketplace.

Porters Generic Strategy

Framework
Michael Porterhas suggested three general types

of positioning strategiesto achievecompetitive

advantage.
These three generic strategies are
1.Cost leadership,
2.Differentiation
3. Focus
Organization chooses to pursue one of two type of
competitive advantage, either via lower cost or
differentiation. Also it chooses one of two types of
scope, either broad target or narrow target.

Cost Leadership
A firm tries to reduce its overall production and

distribution costs.
It wins market share by appealing to costconscious customers.
It sets the lowest prices in the target market
segment, or at least the lowest price to value ratio.
3 ways to achieve this:
Economies of scale
low direct and indirect operating costs
control over the supply chain

Differentiation
A company concentrates on differentiating the

products in some way in order to compete

successfully.
appropriate where the target customer
segment is not price-sensitive, the market is
competitive , customers have very specific
under-served needs and the firm has unique
resources to satisfy these needs in ways that
are difficult to copy.
Includes patents or other Intellectual Property
(IP), unique technical expertise, talented
personnel or innovative processes. Successful
brand management also results in perceived
uniqueness even when the physical product is

Focus
The firm focuses its marketing effort on serving a defined,

focused market segments with a narrow scope by

tailoring its marketing mixto these specialized markets, it
can better meet the needs of that target market.
The firm typically looks to gain a competitive advantage
through product innovation and/or brand marketing rather
than efficiency.
It is most suitable for relatively small firms but can be
used by any company.
A focused strategy should target market segments that
are less vulnerable to substitutes or where a competition
is weakest to earn above-average return on investment.

Thank You.