In this lesson we are going to cover different types of well-known business strategies, namely Generic Strategies, Core Competences, and those associated to the 4 Product Life-cycle stages.
There are three types of Generic Strategies: Cost Leadership, Differentiation, Cost Focus, and Differentiation Focus.
As per figure above, Cost Leadership consists of maintaining the lowest cost of operation in the industry by either (i) increasing profits by reducing costs and keeping prices; or (ii) increasing market share by reducing costs and prices. Differentiation consists of producing different and better products. Cost Focus is focusing on a niche market and developing low-cost products. Differentiation Focus focuses on a niche market as well, but also on developing different and better products.
The Core Competences model can be briefly explained as focusing on what the organisation knows what to do best. By focusing on its strongest points, the organisation will have a competitive advantage. It is preferable to have competitive advantage rather than a comparative advantage over competitors and the reason lies on their definitions, as follows.
As per the figure below, having a Competitive Advantage is outperforming competition in different aspects because there is focus on the Core Competences.
(Prahalad and Hamel, 1990)
Product Life-cycle Strategies
There are 4 product life-cycle stages with different objectives and strategies associated with each of them. Thus, it is important to understand the characteristics of the life-cycle stages so the specific strategic approach can be implemented for a better business performance.