Strategic Management


 Porter’s generic strategies are strategic means identified by Michael Porter through which a company can attain sustainable competitive advantage. Competitive advantage is the edge a company has over its competitors by providing consumers with products that are of a greater value. This can be achieved by: either providing products that have lower prices in comparison to that of their competitors or by providing products that have unique features, that is, those that have been differentiated.


 These strategies are usually classified into cost leadership, differentiation and focus.

 Cost leadership is when the organization sets out to become the lowest cost producer in the industry in which it is operating. This can be achieved when the company produces at the lowest cost or when the costs of purchasing and production are low so that they are able to reduce their selling prices. It can be achieved by a company when they decide to: use cheaper resources, establish large production runs, investing in the latest technology to reduce the cost of labor, cut down on overhead costs and developing product designs and features that require automation.

 Cost leadership can provide a company with competitive advantage in a number of ways. Mainly the organization will obtain economies of scale from the decreased costs of production and the increased amount of goods they will produce. This will mean higher profits in comparison to its competitors.

 They will also have access new market segments and attract and retain consumers from the low prices they offer. This can act as a barrier of entry for its competitors as the organization will have dominance in the market achieved from its loyal consumer base. Wal-Mart uses a cost leadership strategy as they provide their products and services at low prices. They have benefitted from this strategy by attaining economies of scale which is seen from their increased scale of operations over the years (Stiving, 1).

 Differentiation is when the company makes its products and services different from that of its competitors with perceived greater value. The company employs innovation to provide its products and services with unique features. A company is able to obtain competitive advantage in different ways by employing a differentiation strategy. The organization is also able to retain a loyal consumer base and attract new consumers from the perceived higher quality that they offer on their goods and services. As consumers like to be associated with products that provide unique features, the organization is able to charge a premium to its products and still retain its consumer base. This means higher profit margins for the organization (Kaplan, 80). Differentiation can also act as a barrier of entry to competitors. If an organization is able to employ the latest technology in the manufacture of goods, the consumers will remain loyal to this particular seller. Wal-Mart does not differentiate its products.

 Focus is the strategy adopted by a company where they fragment the market and position themselves in such a manner that they pay attention to a particular market niche. The organization focuses on the needs of this market and tried to provide them with suitable products and services.

 This is usually achieved by either differentiating the products provided to this target market (differentiation focus) or by providing goods and services to this particular market at low prices (cost focus). The organization is able to obtain competitive advantage from this as they become a preferred provider of goods and services (Mind Tools, 1). Consumers feel that their needs are understood and catered for where the organization focuses on the market. Wal-Mart does not use this strategy.