Five generic strategies
The relative position of an organization is a major factor that determines whether the profits of the firm are either below or above the average in that particular industry. An organization is only able to post profits that are above average in an industry in the long run if it has a sustainable competitive advantage. A firm can have either of two types of competitive advantage: low cost or differentiation. The combination of the two fundamental types of competitive advantage and the scope of operations for which a company seeks to attain them, results to five generic strategies that will enable the company’s profits to exceed the average in the industry. The five generic strategies are cost leadership strategy, differentiation strategy, focused differentiation, and focused low-cost and focus strategy.
Components of the Generic Strategy
The generic competitive strategy is founded on five generic strategies: cost leadership, differentiation, focus, focused differentiation, and focused low-cost. All the strategies have different mechanisms for attaining their objectives. Companies in the same sector do not necessarily follow the same strategy, it is a decision that is made by the management, on the basis of the desired results of achievement as well as the strengths of the company. All the strategies have distinct components that model the operations of the company (Kossowski, 2007).
Cost Leadership Strate…
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