With a broad generic differentiation strategy, companies run the risk that the product becomes product-based and that competitors meet product quality standards and thus focus on price.
A generic strategy is a general way of positioning a company in an industry. By focusing on a generic strategy, managers can focus on the essential elements of the company’s business strategies and avoid competition in markets that are best served by other generic strategies.
There are three / four generic strategies, economic strategies, differentiated or targeted. A company chooses one of two types of competitive advantage, either for lower costs than the competition or by differentiating according to the size evaluated by customers in order to obtain a higher price.
Likewise, you may be wondering: What are some of the drawbacks and risks of a broad generic business strategy?
A general business strategy that has some drawbacks is the cost management strategy. This strategy can be risky due to the low cost theory, because if other companies adopt this technology, they can also simply save costs.
A broad differentiation strategy is a competitive strategy used by companies to offer unique product features or other characteristics that set the company apart from the competition.
Michael Porter’s five generic strategies focus on developing strategies that will help you gain competitive advantage on three different bases: cost management, differentiation, and concentration.
Let’s take a closer look at each of the five generic company-wide strategies.
There are three competitive strategies you can implement in your business: cost containment strategies, differentiation strategies, and concentration strategies.
A competitive advantage can include access to natural resources such as high-quality minerals or inexpensive resources, a highly skilled workforce, geographic location, high barriers to entry and access to new technologies.
The strategy focused on identifying a niche market and introducing a unique product or service to that market. a certain range of products (e.g. lemon juice, children’s shoes or detergents with bleach).
Nike’s generic cost management strategy gains a cost-based competitive advantage. With this generic strategy, the company minimizes production costs to maximize profitability or lower sales prices. In the late 1990s, Nike lowered the costs and retail prices of sneakers and other products.
Limitations of Generic Strategies
The four strategic alternatives, from the least risky to the most risky, are market penetration, market development, product development and diversification.
Definition: generic strategies
A pricing strategy in which a company offers a relatively low price to stimulate demand and gain market share. Also called the low cost strategy.
8 Tips For Dealing With Competitors
Both a business model and a corporate strategy answer important questions in a company’s business. A business model is the systematic method of generating income in a profitable business. A business strategy is a method by which a primary goal is achieved.