Generic Strategy and Synthesis

Strategy Tools

Cost Leadership / Differentiation / Best-Cost

Cost leadership creates a low cost for a given level of quality (Porter's Generic Strategies). Products get sold at industry average to earn a higher profit than rivals or below industry average to gain market share. By producing a cheaper price, the firm stays profitable for longer periods targeting a broad market. It is useful for improving processes, lowering material costs, making decisions, and efforts of eliminating some costs. It is also used to create barriers to entry. Differentiation is developing products that have unique attributes that give value competitor products do not have. It creates a competitive advantage with products and may allow for premium pricing to cover all associated costs. Best cost combines cost leadership with differentiation to create value added products for the least cost for the level of quality, which in turn, creates a bigger competitive advantage.

Product Life Cycle

Product life cycle is where a product goes through the cycle of introduction, growth, maturity, and decline (Product Life Cycle). Introduction builds product awareness and develops the market. Growth builds brand preference and market share. Maturity is where sales growth starts to decline and acts as a signal to make decisions for product improvement or strategy change. As sales decline, decline is a signal for decisions to add new features, lower price, or discontinue the product.

Prospector / Defender / Analyzer / Reactor (Miles and Snow)

Prospector finds and exploits new product and market opportunity for continued firm growth (Change Management). The defender strives to prevent competitor entry by producing products for a targeted market segment in order to create difficulty for competitors to retain market share. The analyzer seeks to minimize risk while maximizing profit to maintain balance. It seeks to find new market opportunity while generating revenue from existing products and strategy. The reactor reacts to the market with inconsistency and instability. It is a failure by trying to maintain current strategy without regard to changes in the environment.

TOWS Matrix

The TOWS matrix is a tool used to analyze threats, opportunity, weakness, and strengths of a firm at a given time (Weihrich). The use of TOWS enables a firm to analyze a situation to make strategy decisions, maximize opportunity, and create alternative strategy for weaknesses.

Strategy Diamond