The fast and sharp rise of the ride sharing services provider is a testimony to the fact that technology has kept disrupting the norms like nothing else. Michael E Porter has highlighted three key strategies that come in handy if you are trying to build a competitive advantage. Companies in this segment due to their understanding of the customers is able to create a broad range of products to satisfy their customers. The company even has to create a separate segment for both men and women in the showroom itself. This is achieved by having the lowest price in the targeted segment, or having the best perceived value for the service or product received compared to the price charged.
Many perhaps all market segments in the industry are supplied with the emphasis placed on minimising costs. Differentiation can be achieved through real product features or through advertising that causes the customer to perceive that the product is unique. Harley has set itself apart, and established itself as the standard for the true bike rider. It is rewarded for its uniqueness with a premium price. Because the costs associated with the are already low, the company is still making a healthy profit. Handbook of Services Marketing and Management, 409. Under gender segmentation, the database is divided into male or female.
However, providing such individualized attention to customers may not be feasible for firms with an industry-wide orientation. The advantage is static, rather than dynamic, because the purchase is a one-time event. The Focus approach, however, eschews mass appeal, instead layering efforts toward one niche market. Competitive scope of the market — does the company target a wide market, or does it focus on a very narrow, niche market? A strategic objective associated with this intensive strategy is to grow the e-commerce business through an aggressive acquisition strategy. It has then been able to promote in its advertising that one does not get tasteless airline food on its flights. Porter asserts that a successful strategy requires a firm to aggressively stake out a market position, and that different strategies involve distinctly different approaches to competing and operating the business.
Porter's generic strategies detail the interaction between cost minimization strategies, product differentiation strategies, and market focus strategies of porters. There were several holes in the taxi industry which allowed Uber to jump in and by filling these gaps in service quality and pricing strategy, Uber made it to the top in nearly no time. Adding product features means that the production or distribution costs of a differentiated product may be somewhat higher than the price of a generic, non-differentiated product. Can you reduce training costs by devising in-house schemes for sharing skills and knowledge amongst team members? Cost leadership As its name might imply, cost leadership allows a competitive edge by manipulating production costs. But whether you use Cost Focus or Differentiation Focus, the key to making a success of a generic Focus strategy is to ensure that you are adding something extra as a result of serving only that market niche. Market and environmental turbulence will make drastic implications on the root establishment of a firm.
The last part of the book covers strategic decisions related to vertical integration, capacity expansion, and entry into an industry. The organisation is generally focused on internal processes. Tip: Remember that Cost Leadership is about minimizing the cost to the organization of delivering products and services. The choice is up to you, of course. Though Porter had a fundamental rationalisation in his concept about the invalidity of hybrid business strategy, the highly volatile and turbulent market conditions will not permit survival of rigid business strategies since long-term establishment will depend on the agility and the quick responsiveness towards market and environmental conditions.
Enables a firm to achieve above-average returns despite strong competition. An overall low-cost position: -Manage relationships throughout the entire value chain -Provides more flexibility to cope with demands from powerful suppliers for input cost increases -Protects a firm against powerful buyers -Provides substantial entry barriers from economies of scale and cost advantages -Puts the firm in a favorable position with respect to substitute products -A firm's generic strategy based on creating differences in the firm's product or service offering by creating something that is perceived industry-wide as unique and valued by customers. While cost leadership is the main generic strategy sued by Coca Cola, it has also used differentiation to gain an advantage over the competitors. Below is a discussion of the intensive strategies used by Coca Cola to grow its market and sales. For example, General Electric relies on diversification as a major growth factor through the years. Academy of Management Journal, 27 3 , 467-488. Each of the three options are considered within the context of two aspects of the competitive environment: The generic strategies are: 1.
The final generic strategy, focusing also called niche or segmentation strategy , involves concentrating on a particular customer, product line, geographical area, channel of distribution, stage in the production process, or market niche. These three strategies are cost leadership, differentiation and focus. While cutting costs, the firm also introduced new products designed to differentiate Nike's products from those of the competition. A focus strategy is known as a narrow scope strategy because the business is focusing on a narrow specific segment of the market. This article presents an analysis of the generic and intensive strategies used by Uber to build competitive advantage and find market growth and expand its brands.
The concept of choice was a different perspective on strategy, as the 1970s was the pursuit of market share size and scale influenced by the. Since the writing of his book, the phrase has become known in business circles as one of the primary methods of business planning and strategizing for businesses across all industries. A cost leadership strategy may have the disadvantage of lower customer loyalty, as price-sensitive customers will switch once a lower-priced substitute is available. It makes it harder for companies to sustain operational advantages, but it opens new opportunities for achieving or strengthening a distinctive strategic positioning. Large buyers have less power to negotiate because of few close alternatives. This image has allowed the firm to market everything from suits and ties to golf balls. Michael Porter suggested that businesses can secure a sustainable competitive advantage by adopting one of three generic strategies.
They outline the three main strategic options open to organization that wish to achieve a sustainable competitive advantage. Costs are removed from every link of the value chain- including production, marketing, and wastages and so on. The hospital industry may represent such an environment, as hospitals must compete on a variety of fronts. Another potential danger for firms pursuing a focus strategy is that competitors may find submarkets within the target market. Anyone who owns a vehicle and can drive can become a driver for Uber and earn money working part time.