Porters generic strategies Flashcards
1
Q
What does Porter’s Strategic Matrix achieve to aim.
A
- The matrix identifies how businesses can achieve competitive advantage through cost and differentiation strategies, across either a broad market or a niche market.
2
Q
What is the definition of cost leadership
A
- Competing on price by reducing costs across a broad market
3
Q
What are the advantages of cost leadership
A
- Attracts price-sensitive customers and increases market share.
- Resilience to competition as other firms may not be able to match price without compromising profitability
4
Q
What are the disadvantages of cost leadership
A
- Quality may be perceived as lower as a result of cheaper price
- Cost dependency
5
Q
What is the definition of differentiation
A
- Offering unique products or services in a broad market
6
Q
What are the advantages of differentiation
A
- Unique products foster strong brand loyalty, ensuring repeat revenue streams
- High profitability due to the justification of premium pricing.
7
Q
What are the disadvantages of differentiation
A
- High costs due to investment in RnD and marketing.
- Risk of imitation of unique features by competitors
8
Q
What is the definition of cost focus
A
- Keeping costs low within a niche market.
9
Q
What are the advantages of cost focus
A
- Customer loyalty as a result of price sensitive consumers within a niche market
10
Q
What are the disadvantages of cost focus
A
- Operating in niche market restricts sales and growth potential
11
Q
What is the definition of differentiation focus.
A
- Offering highly unique products within a niche market
12
Q
What are the advantages of differentiation focus
A
- Unique and high quality products will justify premium pricing, leads to higher profits
- Brand prestige may lead to higher consumer loyalty
13
Q
What are the disadvantages of differentiation focus
A
- High dependency on niche demand
