Porter's Generic Strategies

Porter 's Generic Strategies

If the primary determinant of a firm 's profitability is the attractiveness of the industry in which it operates, an important secondary determinant is its position within that industry. Even though an industry may have below-average profitability, a firm that is optimally positioned can generate superior returns.
A firm positions itself by leveraging its strengths. Michael Porter has argued that a firm 's strengths ultimately fall into one of two headings: cost advantage and differentiation. By applying these strengths in either a broad or narrow scope, three generic strategies result: cost leadership, differentiation, and focus. These strategies are applied at the business unit level. They are called generic strategies because they are not firm or industry dependent. The following table illustrates Porter 's generic strategies:

Porter 's Generic Strategies

|Target Scope |Advantage |
| |Low Cost |Product Uniqueness |
| |Cost Leadership |Differentiation |
|Broad |Strategy |Strategy |
|(Industry Wide) | | |
| |Focus |Focus |
|Narrow |Strategy |Strategy |
|(Market Segment) |(low cost) |(differentiation) |

Cost Leadership Strategy
This generic strategy calls for being the low cost producer in an industry for a