Porter - Competitive Forces and Generic Strategies

1. the threat of new entrants
2. the bargaining power of suppliers
3. threats from substitute products or services
4. the bargaining power of buyers
5. rivalry amongst existing firms

He recommends three generic strategies to out-perform competitors or maintain a market position against competition.

1. Overall Cost Leadership
   - produce the same/better quality at less cost than anyone else. Enjoy greater profits or - in a price war - stay in the market, profitably, with reduced prices.
   
   This may revolutionise a firm where industry competition has been sluggish. Competitors may be ill-prepared - mentally, economically, operationally - to minimise costs e.g. steel, retail banking, lager, an in-patient day.

2. Differentiation
   - implies a better/different product/service (or perceived as different) from others. With differentiated quality as the target - do we ignore costs?

   Quality imperatives demand a strategy equating the product with "desirable" quality standards. Differentiation can earn above average profits even in slow growth or declining market.

3. Market Niche/Segmentation - focusing on
   1. a section or group of the buying public

      or

   2. a segment of a product line

      or

   3. an area of a geographic market

   Premise - we can service a narrow target more effectively than rivals who compete more broadly. Low cost and differentiation will still be required for the niche.

The Porter recommendation is to avoid getting caught in the middle

Do not lose sight of strategies B and C because A is chosen. Strategy is not something to look at in isolation. It must satisfy as many aspects of the business as possible - short and long term . Take the business as a whole.

References and Further Reading

---

Written by Chris Jarvis for the BOLA project