Michael Porter has developed theories based on business strategy, economics and other causes and is considered as the Father of Corporate strategy and management.
The three bases of strategic positioning are: –
Cost leadership is nothing but following the cheapest pricing strategy for its products which can compete on the price with other companies. These companies focus on mass market and earn higher profit. Example – Walmart.
Product differentiation is the process of differentiating its products or services that provide unique features which are valued by the customers. It includes durability, after sale service, quality, etc. Example – McDonalds.
Focus is nothing but offering a specialized service in niche market. Example – PepsiCo. Focus is divided into two parts: Cost focus Cost focus firms are those whose lower cost strategy that focus on narrow target market and offer products at lower cost compared to the competitors. Focused differentiation Focused differentiation firm are those where they offer unique products to a very narrow target market. They give more importance to service.
The advantage of cost strategy is that the products will be available at lower cost which can help in earning more profits. Disadvantage of cost strategy is that the quality of products and services might get compromised.
The advantage of differentiation strategy is that it helps in creating value for the brand and product uniqueness. The disadvantages of differentiation strategy are the products will be costly, requires lots of research work and might affect the profits because of the competitors.
The advantages of focus strategy are that it helps in building great customer loyalty, requires minimal resources and helps in entering the new market easily. The disadvantages of focus strategy are the growth opportunities are very less, the target audience might change and lots of competition.
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