Business level strategies: Generic Strategies

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Question 2 Business level strategies are also referred to as Generic Strategies. Identify and discuss these Generic Strategies and how firms can use these to create a competitive advantage. Porters Generic Strategies Everyone wants a competitive advantage in this world. A competitive advantage is like a golden ticket to wealth and riches, to a world where your company rules. If one’s organisation is on the higher ground it is always perceived as an advantage over the competition. But that’s just fiction. We all know it’s not just sunshine and roses. It takes a lot to get to the top and be the best and sometimes the road can be challenging and full of holes and boulders that need to be overcome or pushed aside to achieve your goal. There are four approaches of generic strategies. They are one, “Cost Leadership (no frills)”, two, “Differentiation (creating uniquely desirable products and services)”, “Focus (offering a specialized service in a niche market)”. Focus was divided into two parts, “Cost Focus and Differentiation Focus” The Cost Leadership Strategy There’s nothing like the sweet smell of victory when you take away the customers of your competition with your better and awesome products. When an organisation develops an edge and manages to sell their products to the new market then they absolutely have a competitive advantage. When using this strategy there are two ways of achieving a competitive advantage. One is by reducing costs to increase profits, all the while charging average industry prices. Two, while still able to make a reasonable profit on all of the sales made just by reducing costs you can increase the market share by charging lower prices. This strategy involves being the leader on condition that t... ... middle of paper ... ...ofitability is likely to be lower if there is/are: Bargaining Power of Suppliers Weak Suppliers Strong Suppliers Bargaining Power of Buyers Weak Buyers Strong Buyers Threat of New Entrants High Entry Barriers Low Entry Barriers Threat of Substitute Products Few Possible Substitutes Many Possible Substitutes Competitive Rivalry Little Rivalry Intense Rivalry The third step is to compare the SWOT analysis results with that of the five forces results. As each strategic option comes up, ask yourself how that strategy can be used to: Reduce or manage supplier power Reduce or manage buyer power Come out on top of competitive rivalry Reduce or eliminate the threat of substitution Reduce or eliminate the threat of new entry (mindtools.com) Making a success of a generic strategy is the key by using either Cost Focus or Differentiation Focus.

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