Porter's Generic Strategies can give a organisation a good idea of how to compete within an industry, so it is important to have a basic understand of what it is.



On the higher level you get three generic strategies - cost leadership, differentiation and focus. The focus strategy is broken up into cost and differentiation focus.

How can generic strategies help you if you have a business? It can help you identify which segment of the market is underserved and where you could launch a product/service and have the highest chance of succeeding. Think in terms of probabilities and not success/failure when considering different options.

Market research can help you to achieve this goal by giving you a better understanding of what the market is currently like. It is always important to always keep an eye on the market as it will constantly evolve. For example if you were a GPS manufacturer you would have taken note of the growth of smartphones and how they could take market share from GPS’s manufacturers as GPS apps developed.

If there are effective cost leaders in the market you are considering entering it would not make sense to challenge them as they have economies of scale and possible large cash piles to fend of your challenge, you could look into the market and find a niche where you could offer a differentiated product and gain a market share and grow from there. The goal is to face as little competition as possible while you are trying to gain a foothold in the market.

You are not stuck in one strategy and can move out of a focus strategy once you start achieving some market share and scale. An example of this is Amazon, they initially started of on a cost focus strategy by focusing on books, once they managed to gain a foothold they moved into music and movies. Now they sell almost everything that a person can require.

So a strategy can constrain you in the short term but in the long term you can adapt as you grow. We will look deeper into the different generic strategies in following articles.