Choosing the Right Generic Strategy

Selecting the right strategy can be both daunting and overwhelming at the same time. In Porter’s generic strategy I have extensively outlined the three famous strategies to gain a competitive advantage over competitors. These strategies are —

• Cost leadership
• Differentiation leadership
• Focus leadership (Segmentation and niche strategy)

The choice of which generic strategy to pursue underpins every other strategic decision you make, so it’s worth spending time to get it right.

But you do need to make a decision: Porter specifically warns against trying to “hedge your bets” by following more than one strategy. One of the most important reasons why this is wise advice is that the things you need to do to make each type of strategy work appeal to different types of people. Cost Leadership requires a very detailed internal focus on processes. Differentiation, on the other hand, demands an outward-facing, highly creative approach.

So, when you come to choose which of the three generic strategies is for you, it’s vital that you take your organization’s competencies and strengths into account.

Use the following steps to help you choose.

Step 1

For each generic strategy, carry out a SWOT Analysis of your strengths and weaknesses, and the opportunities and threats you would face if you adopted that strategy.

Having done this, it may be clear that your organization is unlikely to be able to make a success of some of the generic strategies.

Step 2

Use Five Forces Analysis to understand the nature of the industry you are in.

Step 3

Compare the SWOT Analyses of the viable strategic options with the results of your Five Forces analysis. For each strategic option, ask yourself how you could use that strategy to:

• Reduce or manage supplier power.
• Reduce or manage buyer/customer power.
• Come out on top of the competitive rivalry.
• Reduce or eliminate the threat of substitution.
• Reduce or eliminate the threat of new entry.

Select the generic strategy that gives you the strongest set of options.

Sukant Kumar is a Product / Marketing leader in tech. I am passionate about tech and product and creating memorable user experiences. Connect with me on LinkedIn, mentioning this story. If you liked this story do let me know in comments and don’t forget to clap a dozen times 😎