Strategic management by porter's generic strategies

Question 1

Lower cost strategy

Answer 1

Is where a business is able to gain a competitive advantage by becoming the low cost producer in its industry.

Question 2

Lower cost positivities

Answer 2

Strong competitive advantage in markets with price conscious consumers.

Question 3

Lower cost negatives

Answer 3

• potentially lower customer loyalty as customers are only price sensitive.
• potentially customers may associate lower price with lower quality.
• standardised goods and services will not meet the demands of customers who want unique products, customer specific offerings, or who want something different.

Question 4

Differentiation strategy

Answer 4

The differentiation strategy is where the business aims to be unique in its industry in some way that is valued by its customers.

Question 5

Differentiation positives

Answer 5

• strong competitive advantage in markets with brand loyalty.
• can charge premium pricing as the cost is not such an important consideration to consumers.
• can work with large businesses who have money to create a brand image.
• can work with small businesses who create a unique point of difference.

Question 6

Differentiation negatives

Answer 6

• is not good for price sensitive consumers and markets.
• the unique features can be copied by other products either domestically or overseas which destroys your competitive advantage.

Question 7

To decide which strategy to implement business should look at

Answer 7

• Supplier Power- how easy it is for suppliers to drive costs up.
• Buyer Power- how powerful buyers are in driving prices down.
• Competitive Rivalry- looks at the number and capability of competitors.
• Threat of Substitution- how easy it is for consumers to find a similar good for service.
• threat of New Entry- how easy it is for new competitors to enter the market.