Porters Generic Strategies & 5 Forces

Question 1

how does the generic strategies help a business

Answer 1

How business’ will adopt their place in the market in order to get competitive advantage

Question 2

What is the first strategy

Answer 2

1. low cost producer
   - be the cheapest producer = staying power = increased brand image = benefit from E.O.S (purchasing) = decrease U.C = pass saving onto consumers through low prices
   How:
   - constantly looking for cheap suppliers
   - production process = leanest production process = cut costs = minus U.C
   - drive up the costs of rival firms = patent ur innovations so rivals have to pay licensing fee

Question 3

What is the 2nd strategic position

Answer 3

2. Differentiation
   - have a USP to convince consumers to pay more than rivals
   How:
   - performance and quality
   - place / distribution strategies = most convenient for consumers
   - customer service/ after sales care = offering longest Warranties

Question 4

What is the most dangerous thing

Answer 4

Being stuck in the middle:
Not sustainable you haven’t established ur extreme so you’ll fall short
E.g. tesco not being the lowest price so they can’t fit in with discount retailers nor being the best quality so they can’t fit in with M&S and Waitrose

Question 5

What is the third strategic position

Answer 5

3. Focus in niche markets
   Find 1 or 2 segments that haven’t had the gap filled
   - you need to pick one of the two generic strategies
   E.g. Ferrari niche market high price good quality

Question 6

What are the two uses of the 5 forces

Answer 6

1. Used to assess who has power in the industry

2. they can use resources elsewhere or develop tactics to make itself more powerful

Question 7

Define supplier power

Answer 7

• when business are reliant on their supplier so the supplier can charge higher prices
• especially if there is few suppliers
• supplier sells something unique

Question 8

What is buyer power

Answer 8

• the buyer holds power as demand for the product depends on whether they will buy from the business or not

Question 9

What is entry threat

Answer 9

• power threats from new entrants to the market. New firms can easily set up and compete

Question 10

Substitute threats

Answer 10

• not competing just with direct rivals but with firms that’s have products that substitute to what we’re selling
  E.g cinema chain competing against streaming websites, planes, TVs etc

Question 11

How might a firm try to redress supplier power

Answer 11

• joint ventures e.g. merge so the supplier don’t need to make profit out of us
• trying to maximise E.O.S = bigger orders = bigger customer for them = drive down prices
• seek new suppliers = use other firms that supply something similar to supply us with a component