The article focuses on the main aspects of Porter’s generic strategies. The three generic strategies of cost leadership, differentiation, and focus are discussed along with the advantages and risks inherent with each strategic option. The article includes tips for students and analysts on how to write good generic strategies analysis for a firm. Moreover, sources of findings information for generic strategies analysis have been discussed. The limitations of Porter’s generic strategies analysis have been discussed, and the relationship between these strategies and industry forces is also discussed.
Porter’s Generic Strategies Analysis
Introduction
Porter’s generic strategies framework constitutes a major contribution to the development of the strategic management literature. Generic strategies were first presented in two books by Professor Michael Porter of the Harvard Business School (Porter, 1980, 1985). Porter (1980, 1985) suggested that some of the most basic choices faced by companies are essentially the scope of the markets that the company would serve and how the company would compete in the selected markets. Competitive strategies focus on ways in which a company can achieve the most advantageous position that it possibly can in its industry (Pearson, 1999). The profit of a company is essentially the difference between its revenues and costs. Therefore high profitability can be achieved through achieving the lowest costs or the highest prices vis-à-vis the competition. Porter used the terms ‘cost leadership’ and ‘differentiation’, wherein the latter is the way in which companies can earn a price premium.
Main aspects of Porter’s Generic Strategies Analysis
Companies can achieve competitive advantages essentially by differentiating the ...