8.2a - Porter's Generic Strategies

Question 1

Competitive advantage definition

Answer 1

Something that prevents other businesses taking away a business’ sales and profit

Question 2

What are the generic strategies suggested by Porter?

Answer 2

• Cost leadership
• Differentiation
• Cost focus
• Differentiation focus

Question 3

Porter’s generic strategies definition

Answer 3

Strategies used to create a competitive advantage

Question 4

What are the axes on Porter’s generic strategies model?

Answer 4

• Source of competitive advantage

- Scope of the market business is selling to

Question 5

What strategy will a mainstream business with a large target market market aiming to produce at the lowest cost possible pursue?

Answer 5

Cost leadership

Question 6

What strategy will a business in a niche market pursue?

Answer 6

A focus strategy

Question 7

How is cost leadership achieved?

Answer 7

• Use of economies of scale

- Selling standardised, mass produced products

Question 8

What situations would lead to a cost leadership strategy being used?

Answer 8

If a business believed it could reduce costs through:

• New production methods
• Cheaper raw materials
• New technology
• Increased productivity

Question 9

Advantages of using a cost leadership strategy:

Answer 9

• Production at a low cost, but selling at average price levels (higher profit margins)
• Can gain advantage by selling at low prices

Question 10

How can permanent cost leadership be achieved?

Answer 10

• Patents
• Economies of scale
• High barriers to entry

Question 11

What situations would lead to a differentiation strategy being used?

Answer 11

If a business believed it could emphasise key aspects of the product to make it stand out such as:

• Performance
• Durability
• After-sales service
• Distribution

Question 12

How can differentiation be achieved?

Answer 12

• Packaging
• Branding
• Product design
• Promotion
• Advertising

Question 13

Advantages of using a differentiation strategy:

Answer 13

• Create a USP

- Charge a higher price

Question 14

A niche market business has to do what to stay competitive?

Answer 14

Choose a cost leadership or a differentiation focus strategy (a mix of both will lead to them being stuck in the middle)

Question 15

What does a business using a cost focus strategy offer?

Answer 15

Cheaper but similar alternatives to the market leader (e.g. Aldi)