Week3 - Porters Generic Strategy

Question 1

What is Strategy Formulation?

Answer 1

Set of processes used to create a strategy for an organisation.

Question 2

Role of Strategy Formulation in the Strategic Management Process

Answer 2

1. Brings together the mission + obj, internal and external assessments.
2. Develop a range of strategies.
3. Choose between the different strategies.
4. Allocate resources.
5. Implement strategy.
6. Monitor and Control

Question 3

What is Porter’s Generic Strategy? (4 different strategies)

Answer 3

1. Cost Leadership
2. Differentiation
3. Cost Focus
4. Differentiation Focus

Question 4

What is Cost Leadership with a real life example and how do they do it? (Porter’s Generic Strategy)

Answer 4

Scope: Mass Market
Comp adv: Cost

Aldi- Have good tech, bulk buy and low cost of labour

Question 5

Benefits of using cost leadership approach (Porters Generic Strategy)

Answer 5

• increase profit by decrease costs.
• increase market share by decrease price as costs low.

Question 6

Downfalls of Cost Leadership approach (Porters Generic Strategy)

Answer 6

• Competition can easily copy strategy.
• Need for continuous improvement (Kaizen)

Question 7

What is Differentiation Approach with real example? (Porters Generic Strategy)

Answer 7

Provide different products, features, customer service, branding.

• Innocent Smoothie
• Lululemon

Question 8

Requirements to take on Differentiation Strategy (Porters Generic Strategy)

Answer 8

• High quality products
• Important to have good marketing to make consumers aware of differences
• Understand consumers need - differentiate

Question 9

Downfalls of Differentiation Strategy (Porters Generic Strategy)

Answer 9

• High cost of marketing to make consumers aware.
• Most likely high price that may put off consumers if they’re not aware of benefits.

Question 10

What is the Focus Strategy? with benefits and drawbacks (Porters Generic Strategy)

Answer 10

Concentrates on Niche market

✅ - Build customer loyalty, difficult for new entrants.

❌ - Growth to new areas may be difficult as it’s a niche market.

Question 11

What is Middle of the Road? Benefits, Drawbacks and real example (Porters Generic Strategy)

Answer 11

IKEA - Affordable, differentiated, mass market.

✅ - Combination of strategies that could be more successful in a dynamic market.

❌ - Could lose direction

Question 12

Drawbacks of Porters Generic Strategy?

Answer 12

• Out of date (1980 had more stable markets.
  Today’s markets are dynamic therefore firms may need combination of strategies to be successful.