Principles of Businees Management

Michael Porter's Strategies

Introduction

Michael Porter has defined several strategies of business leaderships and, based on three general types of strategies which include cost leadership strategy, differentiation strategy and focus strategy. These strategies are commonly adopted by many organizations in order to maintain reputation in the market and, produce positive outcomes. These strategies are defined with the help of strategic scope and strategic strengths. He has also ranked these strategies according to the requirements. These strategies are considered as the competitive strategies because, of these strategies business organizations tend to overcome issues and, beat the market along with certain strategic scopes and strengths.

Discussion

Cost Leadership Strategy

This strategy helps the organizations to compete the market by considering several factors which influence the costs, finance and investments. This is also achieved by targeting customers which are cost-conscious and price sensitive. This is also achieved by providing the cheapest rates to the targeted segment of market. This can also be done by comparing the ratio of price to the customers. In order to bring positive outcomes firms are required to produce at cheaper prices than their rivals. The first and foremost aim of each organization is to satisfy customer' requirements and, if there is no customer's satisfaction is achieved then, negative aspects will be observed and, organizations may have negative publicity. It is recommended that, price should be lower in order to have better profit and, gaining of competitive advantage. If organization fails to achieve competitive advantage then, it will become blacklisted for long times.

There are three possible ways to achieve this cost leadership strategy such that, high asset turnover (for example, a air line which is turning around flights too fast). Fixed costs are widely separated and, firm is taking advantage of economic sales. The second approach is the low directing of costs and, this can be achieved by delivering high quality of products. Costs can be minimized by using few components. The third approach is the controlling of the supply and procurement to follow low costs. This can be achieved by purchasing bulk quantity an, giving discounts. It is also noticed that, costs leaderships are not bound on large organizations but, small organizations can also take advantage of it.

Differentiation strategy

Differentiation strategy is observed when there is no presence of price sensitive customer. The market is found to be saturated and, competitive when, differential strategy is observed. Customers have also very few expectations which, can easily be overcome by the organizations and, organizations have resources to satisfy customer requirements. These requirements are met in such a way, that other organizations do not copy these standards and resources. This may also include patents and other Intellectual property and, unique technical expertise such as sport's team stars. For Example, Starbucks is tend to produce coffee by following this strategy. Fashion brands are also dependent on differentiation strategy because, they don't want others copy their brand images.

Focus Strategy

Focus strategy tends to develop focus of organizations in achieving their targets within specific time ...