Competitors are always there. A firm position itself for achievement and strengths of its competitive advantage. There are three generic strategies --overall cost leadership, differentiation, and focus.
The first strategy--overall cost leadership. The firm sells its products either at average industry prices to earn a profit higher than competitors or below the average industry prices to gain market share. For example, foxconn uses tight control of labor costs,minimization of operating expenses, reduction of input costs and lower distribution costs to success in the OEM industry. Another example is Wal-Mart. Wal-Mart is able to lower selling price due to the lower costs.
The second strategy--differentiation. A firm offer unique attributes such as services and quality products that are valued by customers. Possible strategies to achieve product's differentiation include brand image--Apple's ipad, iphone. maintain technology--Microsoft windows. Service--Google search engine. Quality/Value--Louis Vuitton leather products. Customers see the product as different from competing products and they like the product features, customers are willing to pay a premium for these features. Apple's products are the best example for the differentiation strategy. Apple provides unique products, high price,and not easy for competitor to copy.
The third strategy--focus. Focusing involves concentrating on a particular customer, product line, geographical area, channel of distribution, stage in the production process, or market niche. Also, meet the customer's needs. For example, Whole Food store sells organic foods, Subway sandwiches have customers select their own topping for sandwiches.
Porter's generic strategies provide a set of methods that can be used singly or in combination to create a dependable business strategy.
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