Stonehouse et al. (2004)

Management > Global Strategic Management > Lectures > Independent Research > Stonehouse et al. > The Drivers > Resource-based approach > The Resources > The macro-environment > global/transnational strategy > Global strategies > Strategies - generic/competitive > Generic strategies

Generic Strategies

Cost leadership strategy - compete on profits and lower price of the product, with the emphasis on gaining more profits from cheaper production, rather than competing directly on price. To do so depends on the value chain of activities, so as to:

Advertising product to gain many sales
Economies of scale in production process
Invest/use latest technology to lower production costs
High levels of productivity, which reduces labour costs
Copy designs (no innovation)
Get cheaper materials
Reduce distribution costs
Get government help
Exploit knowledge/experience (touches upon knowledge/competence strategy)

Differentiation strategy - to distinguish themselves from competitors, or at least to be perceived as different by customers. The aim is to reduce elasticity of demand (so they can charge more with little changes in demand).

Differentiation can be achieved through branding, technical superiority, quality, packaging, distribution, image and after-sales service. To do this, businesses need to always innovate to stay ahead.

Focus strategy - sometimes it is beneficial to target a specific market segment, such as geographic area or age bracket. A firm can target either one market or several, with the same good, or with different ones. A focus strategy is good for smaller businesses, as they will be too small to target the whole market.

Porter argues that it would not be beneficial for firms to do hybrid strategies of cost/differentiation, as then a firm would be "stuck in the middle". Stonehouse et al. argue that it can be done, but that emphasis needs to be placed on one or the other, depending on the industry and goals of the business.

Combination

Value System

Total global