Components of Porter’s strategy framework
Describe about Generic Strategy of Ansoff Matrix and Porter?
The report will discuss in detail about Ansoff Matrix and Porter’s generic strategy. The report will try to highlight that how Ansoff Matrix is applied on various organisation and what is significance of each matrix for different organisations. Further the report will focus on Porter’s generic strategies and how these strategies can be beneficial for different type of organisations.
- Penetration: - there is a situation where the company tries to sell the product to the present loyal customers and for that they engage in some strategies like penetration strategy (Jarratt & Stiles, 2010). It can be done in various ways like by changing the pricing and also by adding minute factors like new and improved features which will add value to the products or by changing the packaging like sachets of shampoo or by highlighting various other uses of product (Jarratt & Stiles, 2010). Here a perfect example can be taken of Cadbury India where the company is pushing the message to buy more chocolates instead of sweets specifically on festivals (Hussain et al, 2013).
- Product development: - company like McDonald’s introduce different variety of cuisine from time to time in order to retain its existing customers and many of the items are pushing the concept of health and fitness for health conscious people (Jarratt & Stiles, 2010). For example, McDonald had introduced salads which are not something for which it is known for. However, there was a lot of pressure from the system and also the consumer behaviour changing towards health and fitness, the company had to take the decision in order to develop their product (Jarratt & Stiles, 2010).
- Market development: -market development happens when an existing product is being introduces in the different market (Hussain et al, 2013). This strategy is one of most used strategies in order to extract the all the advantages of that successful products. A perfect example which can be taken here is entering into different geographical area available on national and international level (Hussain et al, 2013). Like Apple has introduced many iPods of different type which is present into the same category. IPod Touch was tried to be made of iPhone and the only difference is that it couldn’t make any calls.
- Diversification: - Diversification is something when a totally new product is introduced by the company in a completely new market and this is termed as diversification (Hussain et al, 2013). Here, iPhone is one of best example which has proved to be most successful diversification present in the market and as per the launch the company tried to target a very large customer group and it is very different from its traditional small market following (Hussain et al, 2013). Infect the CEO of the company Steve Job made sure through his hard work and dedication in creating a contract with the help of many music labels and various artists (Hussain et al, 2013).
According to Porter, the complete framework of strategy has two important components; one is internal and second is external analysis (Porter, 2012). While external analysis builds on economic perspective of the industry structure and how a firm make the most of the competencies of the company. When Porter says that organisation should not get stuck in the middle when it comes to strategy. By this statement he means that a company should compete in all possible ways and the best way to compete is set a strategy and get along with it. The set strategy should be simple and should not be very complex (Porter, 2012). It mainly focuses on hoe an organisation should compete. Porter’s focus on whole structure of the industry is basically a powerful method which covers analysing the competitive advantage and also building competencies which help the organisation in taking effective decisions and the power of effective decision making only increases in this situation. Though there are many companies which emphasize on just one type of analysis and also very essential however it is not sufficient to set the company on the right path (Porter, 2012). The actual strategies of the company have to focus on the company most challenging factor and the issues it is facing in various aspects of the organisation. Some of these strategic decisions are more based on the events that are happening in the present and on the other hand there are some which are subject of periodic strategic reviews (Porter, 2012).
Now, as far as generic strategies are concerned there are three approached which come under these strategies since they can be applied on products or services and it also can be available for all size of companies (Porter, 2012). Porter named these strategies as cost leader ship which can also be known as no frill strategy, differentiation where the company will have to create an unique or desirable products and services and focus where companies offers a specialised service in a specific niche market (Porter, 2012). Focus strategy can subdivide into further two parts as cost focus and differentiation focus.
The main motive of Porter’s generic strategies is to gain competitive advantage which means the company will focus on developing an edge that helps the company in getting the maximum sales of their product or service and also help in take it away from the competitors. This can be done through two strategies (Porter & Lee, 2013). First one is increasing the profits by reducing the costs and also charging prices which are on the basis of average in the industry. Second method is increasing the market share through charging lower prices and increasing the sales.
Porter’s generic strategies
Another strategy defined by Porter is the differentiation strategy which means that the company make its own product or services different from the competitors and also make it more attractive for the customers (Porter & Lee, 2013). How company do it completely depend on the nature of the market in which the company is working and it will also involve features, functionality, durability and support. Apart from this, the company also depend on brand image of the customer value (Porter & Lee, 2013). Organisation also needs to focus on a strong research which involves development and innovation, the capacity to deliver high quality product or services and effective sales and marketing so that the industry understand the advantages offered by the differentiated company (Porter & Lee, 2013).
Then there is focus strategy which focus on companies that use this strategy mainly concentrate on specific niche market and also tries to understand the dynamics of the market and the specific needs of the customers within it (Porter & Lee, 2013). The company also focus on developing a uniquely low cost and well specified product or services. The main motive of these companies to build a strong brand loyal customers and the company is able to do so since these companies serve customers in a unique manner. This is why this specific market segment is less attractive for the competitors (Rangan et al, 2012).
As a part of broad market strategies, it is very important to decide before hand whether the company will focus on cost leadership or on differentiation strategy. So in this strategy the company will either depend on cost focused strategy or on differentiation strategy (Rangan et al, 2012). On the broader basis, the main key is to ensure that the company is adding something extra which as a result serves only that specific market niche. The fact that something extra which can be done through number of ways like reducing costs or by increasing differentiation, it is important to focus on the kind of customers company is serving and the kind of expectation of the customers (Rangan et al, 2012).
Porter always maintained in his work of generic strategy that the one thing in which companies need to focus is not to get stuck in the middle when it comes to strategy which means it is very important to choose the right and a perfect generic strategy since the decision to choose a specific type of strategy will help in underpinning every other strategic decision for the company and make it more worthwhile in order to spend right time on right things (Rangan et al, 2012). However, this is a very crucial decision for the company and they need to focus on choosing an appropriate strategy and also avoiding hit and trial method which may result in losing a lot of money and time. Since the generic strategy covers different type of people and all the strategies proposed by the customer covers different market area, it is not advisable to focus on all three types of strategies at the same time (Rangan et al, 2012). Therefore when the company is in the process of choosing three generic strategies, it is significant to take into account the competencies of the organisation and its strength into account (Rangan et al, 2012). There are number of steps which can be followed here in this case. The first one is that for each generic strategy the company will have to focus on SWOT analysis where the company can understand its strengths and weaknesses, the opportunities and threats that the company can face if in case they adopted a specific strategy (Rangan et al, 2012). This will help in giving a clear idea to the company and they can easily make the right decision. Second step is to conduct five forces analysis in order to understand the nature and the pattern of the industry in which the company is working (Porter & Kramer, 2011). Another step is to make a comparison between the SWOT analyses of the viable strategic options with the result of the five forces analysis of the company and for each option, the company can ask themselves how the specific strategy can be used (Porter & Kramer, 2011).
There are number of strategies which can be used here like by reducing or managing the power of suppliers or reducing or manage the power of the customers or buyers (Porter & Kramer, 2011). Further the company can also come out on the top of rivalry among the competitors and also reduce or eliminate the threat of any kind of substitution and the company can also work on reducing or eliminating the threat of new entry. The company can select the generic strategy that gives the company a strongest way to capture the market in the best possible way (Porter & Kramer, 2011).
The report has discussed in detail about Ansoff Matrix and Porter’s generic strategy in detail and highlighted the advantages of all the points covered in both the concepts. The report has tried to understand that the basic difference between the companies and how these different companies will have to adopt different strategies in order to sustain in the market for the longest period of time.
Jarratt, D., & Stiles, D. 2010. How are methodologies and tools framing managers' strategizing practice in competitive strategy development?. British Journal of Management, 21(1), 28-43.
Hussain, S., Khattak, J., Rizwan, A., & Latif, M. A. 2013. ANSOFF Matrix, Environment, and Growth-An Interactive Triangle. Management and Administrative Sciences Review, 2(2), 196-206.
Porter, D. R. 2012. Managing growth in America's communities. Island Press.
Porter, M. E., & Lee, T. H. 2013. The Strategy That Wilt Fix Health Care.Harvard Business Review, 91(10), 50-+.
Rangan, S., Adner, R., & Strategy, E. S. 2012. Profits and the Internet: Seven misconceptions. MIT Sloan Management Review. v42 i4, 44.
Porter, M. E., & Kramer, M. R. 2011. Creating shared value. Harvard business review, 89(1/2), 62-77.
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