the five generic

8/13/2019 The Five Generic

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THE FIVE GENERIC

COMPETITIVE STRATEGIE

1.A low-cost provider strte!"-striving to achieve lower overall costs than rivals

and appealing to a broad spectrum of customers, usually by under pricing rivals.

The Cost Leadership Strategy

Porter's generic strategies are ways of gaining competitive advantage in other words,

developing the !edge! that gets you the sale and ta"es it away from your competitors.

There are two main ways of achieving this within a Cost Leadership strategy#

$ncreasing profits by reducing costs, while charging industry-average prices.

$ncreasing mar"et share through charging lower prices, while still ma"ing a

reasonable profit on each sale because you've reduced costs.

#. A $rod di%%ere&titio& strte!"- see"ing to differentiate the company's product

offering from rivals' in ways that will appeal to a broad spectrum of buyers.

%ifferentiation involves ma"ing your products or services different from and more


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attractive those of your competitors. &ow you do this depends on the eact nature of your

industry and of the products and services themselves, but will typically involve features,

functionality, durability, support and also brand image that your customers value.

To ma"e a success of a %ifferentiation strategy, organi(ations need#

)ood research, development and innovation.

The ability to deliver high-*uality products or services.

+ffective sales and mar"eting, so that the mar"et understands the benefits offered by

the differentiated offerings.

Large organi(ations pursuing a differentiation strategy need to stay agile with their new

product development processes. therwise, they ris" attac" on several fronts by

competitors pursuing ocus %ifferentiation strategies in different mar"et segments.

'. A $est-cost provider strte!" - giving customers more value for their money by

$ncorporating good-to-ecellent product attributes at a lower cost than rivals the

Target is to have the lowest /best0 costs and prices compared to rivals offering

products with comparable attributes.

(. A %oc)sed *or +r,et &ice strte!" $sed o& low costs - concentrating on a

narrow buyer segment and out competing rivals by having lower costs than rivals

and thus being able to serve niche members at a lower price.

/. A %oc)sed *or +r,et &ice strte!" $sed o& di%%ere&titio& - concentrating

on a narrow buyer segment and out competing rivals by offering niche members

customi(ed attributes that meet their tastes and re*uirements better than rivals'

products.

+ach of these five generic competitive approaches sta"es out a different mar"et position,


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shown in +ach involves distinctively different approaches to competing and operating

the business. The remainder eplores the ins and outs of the five generic competitive

strategies and how they differ.

THE 0OSTON CONS2TING GROP3S

GRO4TH 5 SHARE MATRI6

The matri assesses products on two dimensions. The first dimension loo"s at the

products general level of growth within its mar"et. The second dimension then measures

the product1s mar"et share relative to the largest competitor in the industry. 2naly(ing

products in this way provides a useful insight into the li"ely opportunities and problems

with a particular product.

Products are classified into four distinct groups, Stars, Cash Cows, Problem Child and

%og. Lets have a loo" at what each one means for the product and the decision ma"ing

process.

Strs *i! sre &d i! !rowt


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Star products all have rapid growth and dominant mar"et share. This means that star

products can be seen as mar"et leading products. These products will need a lot of

investment to retain their position, to support further growth as well as to maintain its

lead over competing products. This being said, star products will also be generating a lot

of income due to the strength they have in the mar"et. The main problem for product

portfolio managers it to 3udge whether the mar"et is going to continue to grow or whether

it will go down. Star product can become Cash Cows as the mar"et growth starts to

decline if they "eep their high mar"et share.

Cs Cows *i! sre7 low !rowt

Cash cows don1t need the same level of support as before. This is due to less competitive

pressures with a low growth mar"et and they usually en3oy a dominant position that has

been generated from economies of scale. Cash cows are still generating a significant level

of income but are not costing the organi(ation much to maintain. These products can be

4mil"ed5 to fund Star products.

8o!s *low sre7 low !rowt

Product classified as dogs always have a wea" mar"et share in a low growth mar"et.

These products are very li"ely ma"ing a loss or a very low profit at best. These products

can be a big drain on management time and resources. The *uestion for managers is

whether the investment currently being spent on "eeping these products alive, could be

spent on ma"ing something that would be more profitable. The answer to this *uestion is

usually yes.

Pro$le+ Cild *low sre7 i! !rowt

2lso sometime referred to as 6uestion 7ar"s, these products prove to be tric"y ones for

product managers. This product is in a high growth mar"et but does not seem to have ahigh share of the mar"et. The could be reason for this such as a very new product to the

mar"et. $f this is not the case, then some *uestions need to be as"ed. 8hat is the

organi(ation doing wrong9 8hat are competitors doing right9 $t could be that these

products 3ust need more investment behind them to become Stars.


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GENERA2 E2ECTRIC3S 0SINESS SCREEN

GE Mtri9 includes nine cells based on long-term industry attractiveness and business

strength:competitive position. The )+ 7atri, in contrast to the ;C) )rowth-Share

7atri, includes much more data in its two "ey factors than 3ust business growth rate and

comparable mar"et share. or eample, at )+, industry attractiveness includes mar"et

growth rate, industry profitability, si(e, and practices, among other possible opportunities

and threats. ;usiness strength or competitive position includes mar"et share as well as

technological position, profitability, and si(e, among other possible strengths and

wea"nesses.


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The individual product lines or business units are identified by a letter and plotted as

circles on the )+ ;usiness Screen. The area of each circle is in proportion to the si(e of

the industry in terms of sales. The pie slices within the circles depict the mar"et share of

each product line or business unit.

T4O 8IMENSIONS OF GE MATRI6


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+ach of the (ones is described as follows#

2eder- ma3or resources are focused upon the S;>.

Tr" rder- could be vulnerable over a longer period of time, but fine for now.

8o)$le or :)it- gamble on potential ma3or S;>'s for the future.

Growt- grow the mar"et by focusing 3ust enough resources here.

C)stodil- 3ust li"e a cash cow, mil" it and do not commit any more resources.

Cs Ge&ertor- +ven more li"e a cash cow, mil" here for epansion elsewhere.

Psed witdrwl- move cash to S;>'s with greater potential.

8ivest- li*uidate or move these assets on a fast as you can.

SPACE MATRI6

The SP2C+ matri is a management tool used to analy(e a company. $t is used to

determine what type of a strategy a company should underta"e.

To eplain how the SP2C+ matri wor"s, it is best to reverse-engineer it. irst, let's ta"e

a loo" at what the outcome of a SP2C+ matri analysis can be, ta"e a loo" at the picture

below. The SP2C+ matri is bro"en down to four *uadrants where each *uadrant

suggests a different type or a nature of a strategy#

2ggressive


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Conservative

%efensive

Competitive

This is what a completed SP2C+ matri loo"s li"e#

SP2C+ 2nalysis is a systematic appraisal of four "ey issues that balance the eternal and

internal factors that should determine the general theme of the strategy#

+ternal

$ndustry 2ttractiveness

+nvironmental Stability

$nternal

Competitive 2dvantage

inancial Strength

;y combining ratings on each dimension on one SP2C+ matri diagram, the framewor"

guides the strategic agenda.

2ssessing the SP2C+ 2nalysis Scores

+ach factor in the Strategic Position and 2ction +valuation matri can be *uic"ly 3udged

but there are benefits for eploring each in detail.

There are a large number of factors that can be considered and each industry will have its

own "ey features which should be included in the detailed SP2C+ evaluation.
http://www.differentiateyourbusiness.co.uk/industry-attractiveness-or-industry-strength-in-the-space-matrixhttp://www.differentiateyourbusiness.co.uk/environmental-stability-in-the-space-matrixhttp://www.differentiateyourbusiness.co.uk/competitive-advantage-in-the-space-matrixhttp://www.differentiateyourbusiness.co.uk/financial-strength-in-the-space-matrixhttp://www.differentiateyourbusiness.co.uk/industry-attractiveness-or-industry-strength-in-the-space-matrixhttp://www.differentiateyourbusiness.co.uk/environmental-stability-in-the-space-matrixhttp://www.differentiateyourbusiness.co.uk/competitive-advantage-in-the-space-matrixhttp://www.differentiateyourbusiness.co.uk/financial-strength-in-the-space-matrix


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2 few factors to be considered to give you a flavor of what to include in your SP2C+

analysis are listed below.

SP2C+ 2nalysis actors or inancial Strength

?eturn on Sales

?eturn on 2ssets

Cash low

)earing

8or"ing Capital $ntensity

inancial Strength is scored @ great to < poor in the SP2C+ 2nalysis 7atri for more

details see inancial Strength in the SP2C+ 7atri

SP2C+ 2nalysis actors %or Co+petitive Adv&t!e

7ar"et Share

6uality

Customer Loyalty

Cost Levels

Product ?ange

Competitive advantage is scored -< /minus ncertainty

$nterest ?ates

Technology

Cyclical
http://www.differentiateyourbusiness.co.uk/financial-strength-in-the-space-matrixhttp://www.differentiateyourbusiness.co.uk/financial-strength-in-the-space-matrixhttp://www.differentiateyourbusiness.co.uk/competitive-advantage-in-the-space-matrixhttp://www.differentiateyourbusiness.co.uk/industry-attractiveness-or-industry-strength-in-the-space-matrixhttp://www.differentiateyourbusiness.co.uk/industry-attractiveness-or-industry-strength-in-the-space-matrixhttp://www.differentiateyourbusiness.co.uk/financial-strength-in-the-space-matrixhttp://www.differentiateyourbusiness.co.uk/competitive-advantage-in-the-space-matrixhttp://www.differentiateyourbusiness.co.uk/industry-attractiveness-or-industry-strength-in-the-space-matrix


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+nvironmental $ssues

#.'.' I22STRATE THE STA;EHO28ES SIGNIFICANCE GRI8

2 sta"eholder analysisallows you to map theinterests and influences of your

sta"eholders in relation to your programmed goals. 2 great way to visuali(e the outcomes

of a sta"eholder analysis is through the power and interest matri

$dentify Aour Sta"eholders

The first step in your Sta"eholder 2nalysis is tobrainstorm who your sta"eholders are.

2s part of this, thin" of all the people who are affected by your wor", who have influence

or power over it, or have an interest in its successful or unsuccessful conclusion.

The table below shows some of the people who might be sta"eholders in your 3ob or in

your pro3ects#

Aour boss Shareholders )overnment

Senior eecutives 2lliance partners Trades associations

Aour cowor"ers Suppliers The press

Aour team Lenders $nterest groups

Customers 2nalysts The public

Prospective customers uture recruits The community

Aour family
http://www.world-heart-federation.org/what-we-do/awareness/kids-on-the-move-toolkit/glossary/#c28306http://www.mindtools.com/brainstm.htmlhttp://www.world-heart-federation.org/what-we-do/awareness/kids-on-the-move-toolkit/glossary/#c28306http://www.mindtools.com/brainstm.html


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Someone's position on the grid shows you the actions you have to ta"e with them#

&igh power, interested people# these are the people you must fully engage and ma"e

the greatest efforts to satisfy.

&igh power, less interested people# put enough wor" in with these people to "eep

them satisfied, but not so much that they become bored with your message.

Low power, interested people# "eep these people ade*uately informed, and tal" to

them to ensure that no ma3or issues are arising. These people can often be very

helpful with the detail of your pro3ect.

Low power, less interested people# again, monitor these people, but do not bore

/sta"eholder mapping0

the five generic

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