1. IB Business and Management
1.6 Porter’s Generic Strategies

2. Learning Outcome
Examine how Porter’s Generic Strategies may provide a framework for building a competitive advantage

3. Porter’s Generic Strategies
Michael Porter suggested that businesses can achieve a competitive advantage over rivals by following one of four strategies outlined in his ‘Generic Strategies’ Model

4. The 2 dimensions of the Generic strategies
Porters says that firms have to make decisions on their strategy in 2 dimensions:
The source of the competitive advantage
The scope of their target market

5. Source of the competitive advantage
Porter argues that firms will either succeed by either:
Being the Lowest Cost Supplier in a particular industry, allowing the business to charge low prices while still being profitable
Creating products which are Differentiated from competitors and can therefore charge a premium price in order to be profitable

6. Scope of the target market
Porter also distinguishes between the scope of the business’ target market.
Businesses will either have a:
Broad competitive scope: aimed at a mass market
Narrow competitive scope: concentrate on small segments of the market (Niche)

7. Video
Watch the video ‘Generic Strategies Mini-lecture’

8. (differentiation)
Stuck in the middle

9. Which strategy have these successful businesses followed…….
What are the advantages/limitations of these strategies?

14. Implications
Firms who try and do more than one strategy will be ‘stuck in the middle’ and will be unlikely to succeed
For example a firm aiming to produce the best quality product at the lowest prices will be unprofitable….. Can you think of any examples?

15. Questions….
Which strategy do you think would be the most difficult to succeed with?
Which strategies do you think would be hard for a business start-up?
Do you agree that firm’s can’t succeed if they are ‘stuck in the middle’? Why?

16. Question…. Which of the generic strategies is Poundland using?
What PEST factors could have aided it’s success?

17. Homework Pick a business of your choice
Which of Porter’s Generic Strategies is it following?
Why do you think it has been successful?
Can you identify other competitors in the industry that are following the same/different strategies