ROE 1
6.1
Generic business strategies are not firm or industry dependent. A generic business strategy can be classified as a cost leadership, focused cost leadership, differentiation, or focused differentiation. According to Rothaermel (2013) cost leadership strategy is defined as a “generic business strategy that seeks to create the same or similar value for customers by delivering products or services at a lower cost than competitors, enabling the firm to offer lower prices to its customers” (p 143).
As the definitions conclude, a broad generic business strategy calls for being a low cost producer (cost leadership strategy) as well as developing a product that is unique (differentiation strategy) and adds more value than other products. There are, however, disadvantages of using a broad generic business strategy. For example, competitors can lower their cost structure by producing a product cheaper, generating more profits. Another disadvantage of abroad generic business strategy is that competitors continue to battle over higher profitability and market share, the product can eventually affect the demand due to cost reductions. These reductions will ultimately affect a business’s competitive advantage.
The textbook also defines a more narrow generic business strategy as well. A focused cost leadership strategy can be defined as the same as the cost leadership strategy except “with a narrow focus on a niche market” (p 143). The focused differentiation strategy is the same as the differentiation strategy but, has a narrow focus on a niche market. While all four terms are similar, they differ to attract different market segments. For example the broad strategy offers both low-priced and unique products to many different customers. The narrow strategy also offers unique products at low-prices, but only to one group of customers. Of course there are disadvantages to a more narrow and focused strategy. The company only buys in small volume, not knowing who
Generic business strategies are not firm or industry dependent. A generic business strategy can be classified as a cost leadership, focused cost leadership, differentiation, or focused differentiation. According to Rothaermel (2013) cost leadership strategy is defined as a “generic business strategy that seeks to create the same or similar value for customers by delivering products or services at a lower cost than competitors, enabling the firm to offer lower prices to its customers” (p 143).
As the definitions conclude, a broad generic business strategy calls for being a low cost producer (cost leadership strategy) as well as developing a product that is unique (differentiation strategy) and adds more value than other products. There are, however, disadvantages of using a broad generic business strategy. For example, competitors can lower their cost structure by producing a product cheaper, generating more profits. Another disadvantage of abroad generic business strategy is that competitors continue to battle over higher profitability and market share, the product can eventually affect the demand due to cost reductions. These reductions will ultimately affect a business’s competitive advantage.
The textbook also defines a more narrow generic business strategy as well. A focused cost leadership strategy can be defined as the same as the cost leadership strategy except “with a narrow focus on a niche market” (p 143). The focused differentiation strategy is the same as the differentiation strategy but, has a narrow focus on a niche market. While all four terms are similar, they differ to attract different market segments. For example the broad strategy offers both low-priced and unique products to many different customers. The narrow strategy also offers unique products at low-prices, but only to one group of customers. Of course there are disadvantages to a more narrow and focused strategy. The company only buys in small volume, not knowing who