Answered: Describe Porter’s four generic business…

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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Describe Porter’s four generic business strategies

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Step 1

Every company trying to compete with its competitors and rivals in the marketplace by offering consumers something different from others to get an extra edge in the long run.

Michael Porter, a professor at Harvard Business School, has written a well -known books on competitive business strategies. His work on generic strategies is popular all over the world and is used by all levels of management. Porter believed that a business had to identify and implement a clear strategy to overcome competition and survive in the long run.

Porter's generic strategies are:

Cost Leadership Strategy.
Differentiation Strategy.
Cost Focus.
Differentiation Focus.

Step 2

Cost Leadership Strategy: It works on the principle of low-cost theory if the company is able to produce its products at the lowest cost in the industry. This strategy is commonly used in markets where products are not distinctly different from each other. They are "standard products" on a wide market frequently purchased and universally accepted by most consumers. In order to become a cost leader, the company seeks to achieve the lowest cost of production at the lowest cost of distribution so that it can offer the cheapest price on the market.

Example: Walmart is one of the well-known brands working on Cost leadership strategy.
Differentiation Strategy: It requires the company to offer products with unique characteristics that consumers believe are valuable or premium and end up willing to pay more as compared to its competitors in the market. If consumers feel that these unique traits are worthwhile, the company may charge premium prices for its product. The company charges high prices so that they can offset high-cost production with a good amount of profit margin.

Example: Apple can be the best example for the brand using a differentiation strategy.

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