5.0 Michael Porter’s Generic Strategies
Porter’s generic strategy identifies three types of generic strategies that can be pursued by almost any business which include the cost leadership, differentiation and focus and it help to achieve, defend and sustain the company competitive advantages. (Huizen, 2006)
Diagram 6: Micheal Porter’s Generic Strategies
The objective of the differentiation strategic involved offering a unique product or service that allows the company to charge a premium price. A successful differentiation allows the company to charge a premium price for the product or service and gain the loyalty of the brands. (Huizen, 2006) (Vipin Gupta, 2007)
5.1 Differentiation
Diageo is using the differentiation strategic, implementing a focused differentiation strategy. Comparatively high Operating profit indicates the premium that is levied on products. Company has achieved competitive advantages by utilizing unique resources to create higher perception of product benefits in comparison to competitors, therefore can charge premium prices. Differentiation advantage has been achieved by obtaining a price premium in the market which exceeds the cost of providing the differentiation. The consumers are usually loyal and willing to pay the high prices for the products of Diageo. Diageo currently launches the products which focused on the customer’s wish for luxury, tastes, quality and brand such as Johnnie Walker, Crown Royal, Windsor, Captain Morgan and etc.
5.2 Focus
Diageo Plc announced that the Chief Executive officer Paul Walsh will step down after his 13 years as the CEO of Diageo in year 2013. Under this past 13 years, Paul Walsh shape Diageo to become the World’s No 1 liquor maker. Paul Walsh focus on the drinks ma...
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...eers markets is large markets around the world; this is because the price of beer is much lower than the other drinks such as whisky, vodka and etc.
Finally, there are some strengths and opportunities for the company. Diageo have own significant brand. Base on the report, the trend of the drinking will growth in the next few years and it is the opportunities of the Diageo which is the lead of the wine and spirits market company. Diageo another opportunity is the famous travel retails. There have a trend shows the travel retail is favorable and there are a lot of sales of the collection of the Johnnie Walker’s collection.
Although the changes of CEO, it may affect the culture of the company, however, the new CEO Ivan Menezes said that will not change in the strategic that Paul Walk using in past 13 years and it may not have the much more effect of the strategic risk.
Ferrell, O. C. (2008). “New Belgium Brewing Company(A)” in Ferrell, O. C., and Hartline, Michael D., Marketing Strategy, Fourth Edition, Mason, Ohio: Thompson Southwestern Publishing, pp. 463-470.
While the scenario is presented as a fictional work, it may well be that this occurs on a daily basis. The conclusions here are based on observations and cultural views. There are many other factors that can be used to determine who should succeed a CEO that is retiring. Some of the items that might be considered are if a style change is needed or the persons experience.
Adopting a strategy of differentiation makes firms provide products and services what are distinct in some way valued by customers.
However, during the 1990s, Philips and Matsushita both faced major challenges to sustain their position in the market. Changing profile of the industry and globalization forces made Philips and Matsushita’s organizational models and competitive advantages obsolete, and brought up the need for drastic actions. At the brink of a new century, the battle of two giants unraveled with CEOs from both sides implementing another round of strategic initiatives and restructurings. The pressure put on new CEOs was enormous – wrong st...
The beverage industry is highly competitive and presents many alternative products to satisfy a need from within. The principal areas of competition are in pricing, packaging, product innovation, the development of new products and flavours as well as promotional and marketing strategies. Companies can be grouped into two categories: global operations such as PepsiCo, Coca-Cola Company, Monster Beverage Corp. and Red Bull and regional operations such as Ro...
Compared to the industry as a whole, Mondavi is not responding to the changing marketplace and demands. While there has been some growth in the ultra and luxury premium market segments, the explosion in the last 15 years had been in the popular premium ($3-7 per bottle) and super-premium ($7-14) sector. Mondavi’s own Woodbridge offering is responsible for 76% of its case volume and 57% of its revenue as of 2001, but seemingly exists in isolation amidst all the high-end offerings from the company. Competitors that have established themselves in jug wine, beer, and other spirits are taking advantage of their sales volume and migrating upward. While E&J Gallo, Constellation, and the beer producers may not have the reputation for quality and craft that RMW possesses, their substantial financial weight has allowed them to develop or purchase brands that could compete in the higher altitudes and price segments. Meanwhile, competitors with similar histories in premium winemaking are taking advantage of lower production costs to horizontally integrate, acquire land, and build new wineries in different countries, as Kendall Jackson has done with the Villa Arceno (Italy) and Yangarra Park (Australia) wines.
Porter (1997) suggests in order to gain competitive advantages in the changing business environment, it is essential to design a generic strategy for the business: product differentiation or cost leadership. The competitive strategy is determined at round 2, when recognised our rivals held whole product profile which was the product differentiation strategy. To differentiate our strategy from rivals for competitive advantages, Digby designed to imply the cost
Both Porter and Miles and Snow’s strategy typologies are based on the concept of strategic equifinality, or the ability for firms to be successful via differing managerial strategies (Hambrick, 2003, p. 116). Porter 's strategy is more generic while Miles and Snow’s is more specific in nature. Porter’s generic strategy typology is based on economic factors centering on the source of a firm’s competitive advantage and the scope of a firm’s target market (González-Benito & Suárez-González, 2010). Porter’s typology emphasizes a firm’s cost, product differentiation or non-differentiation and market focus. When utilizing Porter’s strategy typology, a firm must first decide to target its products toward the mass market versus a market niche or focus. Secondly, a firm will determine if it wishes to minimize costs or differentiate its products with differentiation meaning that firms will most likely forego lower costs (Parnell, 2014, p. 184). This can lead a firm to develop a myriad of strategies between these options. Strategies which may have or not have focus, may or not be differentiated, may or not be low cost or any combination of strategies. In contrast to Porter, Miles and Snow’s typology is more specific in nature.
Differentiation through marketing strategies, this is a form of innovation driven by the need to create a superior brand (Sadler, 2003).
In the modern world of conducting business, any company that wishes to succeed must differentiate its products or services from others in the industry. Differentiation makes it possible for consumers to point out notable differences between one company’s products as compared to those of competitors. Differentiation helps companies build brand loyalty as the uniqueness keeps customers fixed on a particular product. BMW is one of the most popular automakers in the world today. It definitely uses differentiation as a strategy to beat off competition by building products that are innovative, detailed and incomparable to those of competitors.
The new CEO appears to have much more corporate business experience than the previous CEO. Should this be a concern for the corporation?
Diageo has long been the front-runner in the premium drinks business. Its brands include Guinness, Smirnoff, Bailey's, Johnnie Walker, and Cuervo complimented by broad range of local and specialty brands from around the world. In 2002, Diageo held a 15% (United States-Spirits, 2002) market share and was by far the leading manufacturer of spirits in the United States followed by Pernod, and Fortune Brands, Inc. The market is expected to have 9.8% (Huddleston, 2005) growth in the next three to four years, so new entrants may find the going hard unless they have capital to sustain themselves.
Competitive strategy is the approach that an organisation takes in order to gain advantage over its competitors. According to Porter, there are two major sources of competitive advantages: costs and differentiation. Cost-based competitive advantage involves reducing production costs so that an organisation can earn higher profit margin or offer products at lower price compared to competitors. Differentiation-based competitive advantage involves offering unique properties that are not offered by competitors’ products. Differentiation allows an organisation to charge a premium for their products because they offer additional benefits to buyers.
Without a successful business strategy put in place the company would fail and be unable to compete with competitors. There would be on way of knowing what resources are required. No planning for the future of the business. If there are no targets set out to achieve there would be no way of measuring how successful the company has been.
There are a lot of competition in the coffee industry, such as Dunkin Doughnuts, McDonald’s, and quick stops. Starbucks differentiation strategy is what puts the company of its rivals. According to Porter, the most important thing that makes differentiation strategy successful is the unique and difference of products and services that contribute to represent the company’s competitive advantage (Quick MBA, 2010). Romans 12:2 states, “Do not be conformed to this world, but be transformed by the renewal of your mind, that by testing you may discern what is the will of God, what is good and acceptable and