Generic strategy
Five generic strategies are required to strengthen the competitive advantage of a product or service offered by a firm. These Generic strategies include; focus strategy, differentiation strategy, focused low-cost strategy, best-cost strategy, and focused differentiation strategy. A firm selling children’s products can increase their competitive advantage only when a combination of these strategies is used in marketing.
Low-cost strategy
This generic strategy is used to reduce the cost of production in every segment of production. The plan is to reduce costs at all levels, the products manufactured are produced at a minimum cost starting from the raw materials required for production to the labor involved in the production. The products are produced on a large scale, and this can give the firm a competitive advantage. The advantage of this strategy is that it will help to reduce the overall cost of the product and raise the profit margin for the industry.
The Differentiation Strategy
A product that differs from all other close substitutes has a competitive advantage. In an era when competition for superiority is slim, differentiation of a product influences customer’s appeal for a particular product. Product differentiation strategy is a unique approach to a productive market plan. Although such a style or product value can be short-lived due to copyrights, it can create a competitive advantage and boost customer’s appeal for any product. It is worthy of mentioning that differentiation strategy enables the industry to control the prices of the commodity, increase sales of products, and strengthen product loyalty.
Focused Strategy
The firm seeks to produce a particular product or services for a particular market. For example, a firm may see the need to produce exotic cars for aged people and may continue in that line of business only. As soon as the focused strategy is established, the company can use either the low-cost strategy or differentiation strategy to increase sales.
Focused low-cost strategy
Under this strategy, the industry locates a particular segment that requires low-cost for production and then builds on it. If a firm that produces sandals, discovers that the raw materials required for the production of sandals are cheaper than that required for producing bags, the firm will focus on the production of sandals.
Best-cost strategy
Under this strategy, the firm utilizes the best marketing approach and expands the production of more products. This direct method examines the profit trends of the firm. The company may decide to use a combination of one or more market strategies to create a product or services. The objective is to maintain product differentiation and loyalty
Risks of the five Generic strategies
Low-cost strategy
Low-cost strategy can be a disadvantage to a firm due to imitation. For example, if a company reduces the price of a product and other firms producing similar products reduce their prices there will be no competitive advantage on that product. In addition, customer’s appeal disappears when the price of a product is low. This is because the customer may feel that the product is substandard.
The Differentiation Strategy
Product imitation can reduce a competitive disadvantage for a product. This is a risk in a differentiation strategy. The change in technology can be a risk for a firm because products differentiation will have a reduced life span.
Focused Strategy
The risk associated with this strategy includes the loss of competitive advantage and imitation.
Focused low-cost strategy
Market size is a major risk that relates to a focused low-cost strategy. When a firm targets a segment of the market population and cannot evaluate the profit margin for the products manufactured for the target group, it could reduce the competitive advantage of the firm.
Best-cost strategy
Best-cost strategy can be risky due to the imitation of products or patents by competitors. Another risk is the change in technology. The advancement in technology has resulted in the change of product styles on a daily basis just to meet the market trend. It means that a product cannot sell for a long time before another technology is introduced to replace that particular product.