Summary of Porters generic strategies is about how a firm can achieve a competitive position in the industry

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Porter's generic strategies model proposes that businesses should focus on one of three strategies in order to achieve a competitive advantage in their industry - cost leadership, differentiation, or focus. However, this model has been criticized for being too difficult to implement in practice, as it is often difficult to define an industry in a clear way. Additionally, some businesses may attempt to be in all four strategies simultaneously, but this ultimately leads to them being in the middle of the pack.

  • 00:00:00 The four generic strategies identified in "Porter's generic strategies" are cost leadership, differentiation, cost focus, and differentiation focus. Each strategy has two sub-categories, cost leadership and differentiation, and two focus areas, cost focus and differentiation focus. Cost leadership is achieved by economies of scale, where low-cost producers sell a standard product to a broad target of the industry, and differentiation is achieved by offering something unique compared to other firms in the industry. Cost focus is achieved by selling products at a lower cost than the competition, and differentiation focus is achieved by finding aspects of the product that appeal to customers and that they are willing to pay a premium for.
  • 00:05:00 In this video, Porter discusses generic strategies for businesses in the industry of clothing labels. According to Porter, there are two focus fields businesses can use to achieve a competitive position in this industry: focus strategy, which focuses on a segment or group of segments within the industry, and focus differentiation, which exploits the needs of buyers in a certain segment. Although it is not possible to identify a segment that can be operated separately in all industries, it is possible to identify segments that can be operated separately in the industry. Competitive advantage in focus strategy can be divided into two fields: cost and differentiation. Cost focus exploits the differences in cost behavior between segments, while differentiation focuses on selected parts of the market that are willing to pay more for a specific benefit. An example of differentiation is exclusive travel, which is a narrow part of the total market and is targeted at the elderly population. Porter warns against companies that do not have a defined generic strategy, as they will be stuck in the middle and unable to achieve their goals.
  • 00:10:00 The "Porters generic strategies" model is a model that suggests that there are no clear advantages to be had in the industry by a firm that does not possess a specific competitive strategy. This model suggests that firms should instead focus on either cost leadership, differentiation, or focus on their customers. In the case of the airline industry, for example, firms may attempt to be in all four strategies simultaneously, but this ultimately leads to them being in the middle of the pack. Another criticism of the model is that it is difficult to define an industry in a clear way, making it difficult to determine which generic strategy would be the best option for an individual industry.

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