Video Transcript: Porter's Generic Strategies

Hello everyone, and welcome to Mr. Simplifies Tutorials. In this video, we're  going to look at Porter's generic strategies, which is a way of devising business  strategies for a competitive advantage. What is competitive advantage to begin  with? Simply put, it's just a way of getting higher profits than your competitors in  the marketplace. And how do you actually gain a competitive advantage by  looking at two key dimensions. And what are these dimensions? The first  dimension is the scope of the business strategy, which, in simpler terms, just  means the reach of the business or the customer base, which is being targeted.  So you could either target a narrow section of the market and focus entirely on  that section, or you could look at the whole market. What is the second key  dimension? The second key dimension is the actual source of competitive  advantage. How do you actually intend to get competitive advantages over the  marketplace? You can either do that by differentiating your product or service, or you can provide lower costs. Very simple to understand, and now we're going to  look at a chart, which makes it even simpler, if you observe the chart, you'd see  that the top section looks at the overall market. So the two dimensions are the  same, but the focuses can either be narrow or broad, so it's always the cost or  differentiation the top left quadrant looks at the overall cost. The top right  quadrant looks looks at the overall differentiation, and then the bottom left  quadrant looks at cost focus, which is a narrow way of looking at costs. And then the bottom right quadrant looks at differentiation focus so very easy to  remember. The top section is broader than the narrow section. That's the way to  remember it. Now let's look at the top left quadrant to begin with, which is overall cost. Overall cost just means becoming the lowest priced provider for a broad  customer base. How is it? How is this achieved? This is achieved by efficient,  lean production methods, closer relationships with suppliers, investments in new technologies and in various other ways. Examples. Examples can be Ryanair,  Amazon and Poundland, very obvious examples. Now, if we look at Amazon,  Amazon sells pretty much the same product, products as everybody else, but  the prices in Amazon are generally cheaper than than the prices that you you  find a high street, high street retail shops, and it's it's also like a single  marketplace for pretty much anything. So the cost becomes the biggest  advantage. And obviously there is an advantage of convenience as well. When it comes to Amazon, Poundland, on the other hand, is completely cost based.  Now looking at overall differentiation, here you'd look you need to do something  unique or something different, something more efficient or better than the overall market to actually gain a competitive advantage. How do you actually achieve  it? By providing higher quality, better brand value, very important, wider  distribution. Now let's look at examples and get this get the concept clearer.  Apple. One of the most popular examples for overall differentiation. Is Apple,  because the brand value of Apple is is better than pretty much everybody else  these days. Another example can be Mercedes Benz. So these are brands 

which which get a competitive edge, just plainly because of their brand value.  Looking at cost focus. Now it means cost leadership in a narrow or focused  market. Remember, it's it's one of the lower quadrant. It's on the lower section of the chart. Examples can be Aldi, again, a very focused marketplace. It it  specifically targets customers that that are looking for cheaper alternatives to  popular brands and products. It doesn't stock absolutely everything, but it only  stocks things that it can provide at a much lower cost than its counterparts. Rolls Royce a very contrasting example. It's got a cost leadership in a very focused  market, and that focused market is the rich and elite. Now looking at  differentiation focus again, differentiation strategies in a narrow or focused  market, for instance, Ducati. It's only for for for real motorcycle enthusiasts who  are looking for very high performance motorcycles and are willing to pay a  premium for it. Now, interestingly, another example of a differentiation focus  strategy is when Costa adapted the drive through policy or or business model,  rather by adapting by actually embracing a drive through model, what Costa did  is coaster did. Costa focused on customers who don't really necessarily want to  sit down and have a cup of coffee. They like the brand, they actually like the  offering provided by Costa, but don't have the time to actually sit down and  enjoy a cup of coffee. They have it on the move. So these were some of the  examples of companies who focused on one particular aspect or one particular  quadrant of Porter's generic strategies. Now it is very important that to  remember that a lot of companies try to actually maintain a balance between  more than one quadrant, and what happens is, if you try to focus on more than  one quadrant at the same time, there is always a possibility that you'd focus on  neither or get stuck in the middle. What happens when you get stuck in the  middle? Well, you don't have a cost focus. You don't have an overall cost  advantage. You're trying to reduce costs, and you're impacting your overall  quality and differentiation in the meantime, and therefore you're neither cost  effective nor differentiated. Let's look at examples of it, of companies that are  stuck in the middle at this point in time, Sony can be a good example. Although  there are various various type of products that Sony does very efficiently, it  definitely doesn't have the competitive advantage or the low cost advantage as  some of the other competitors in the competitors in the marketplace. The same  can be said about Morrison's, where the retail market sector is kind of  overcrowded and also dominated by a few suppliers, few retailers, Morrison's  loses out its competitive advantage. So that was a brief introduction of Porter's  generic strategies and very important strategies, even in this day and age,  because of just the just the simplicity of it, and just just the reason of just the  ease of focusing or being able to focus on one particular quadrant at a time,  rather than focusing on too many things. Okay, that was a brief introduction.  Hope that was helpful for you and I thank you very much for your attention and  your attendance as always. Keep liking content on this channel. Support this 

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