Fundamentally, the risks in pursuing the Porters generic competitive strategies are two: first, failing to attain or sustain the strategy; second, for the value of the strategic advantage provided by the strategy to erode with industry evolution. More narrowly, the three strategies are predicated on erecting differing kinds of defenses against the competitive forces, and not surprisingly they involve differing types of risks. It is important to make these risks explicit in order to improve the firm’s choice among the three alternatives. Risks of Overall Cost Leadership Strategy Cost leadership imposes severe burdens on the firm to keep up its position, which means reinvesting in modern equipment, ruthlessly scrapping obsolete assets, avoiding product line proliferation and being alert for technological improvements. Cost declines with cumulative volume are by no means automatic, nor is reaping all available economies of scale achievable without significant attention. Cost leadership strategy is vulnerable to the Continue reading
Marketing Principles
Porter’s Generic Competitive Strategies
In 1985, in his book  Competitive Advantage: Creating and Sustaining Superior Performance,  Michael Porter, outlined a set of generic strategies that could be applied to all products or services.  In coping with the Porters model of  five competitive forces, there are three potentially successful generic strategic approaches (also known as Porter’s Generic Competitive Strategies)  to outperforming other firms in an industry: Overall cost leadership. Differentiation. Focus. Sometimes the firm can successfully pursue more than one approach as its primary target, though this is rarely possible as will be discussed further. Effectively implementing any of these generic strategies usually requires total commitment and supporting organizational arrangements that are diluted if there is more than one primary target. The generic strategies are approaches to outperforming competitors in the industry; in some industries structure will mean that all firms can earn high returns, whereas in others, success with one of the generic Continue reading
Product Life Cycle – Meaning, Stages and Significance
Many products generally have a characteristic known as perishable distinctiveness.  This means that a product which is distinct when new degenerates over the years into a common commodity. The process by which the distinctiveness gradually disappears as the product merges with other competitive products, has been rightly termed by Joel Dean as “the cycle of competitive degeneration”. The cycle begins with the invention of a new product and is often followed by patent protection, and further development to make it saleable. This is usually followed by a rapid expansion in its sales as the product gains market acceptance. Then competitors enter the field with imitation and rival products and the distinctiveness of the new product starts diminishing. The speed of degeneration differs from product to product. While some products fail immediately on birth or a little later, others may live long enough. BPL’s picture in picture TV was eliminated Continue reading
Improve, Buy or Drop a Product
If a product is not showing profitable performance, the company may consider one of the alternatives, viz., improve, buy or drop the product. Improve If the firm continues to make the product, it may be required to make improvement in its production or distribution so as to yield adequate return.  Improvement may mean re-designing the product or producing it at a lower cost.  Product improvement is particularly necessary when the existing product has become apparently obsolete or out of fashion.  Indian companies need to continuously upgrade their products and technology to withstand the pace of change in their business environment and to meet the challenges thrown up by the emergence of a buyer’ market.  Product improvement is very important in durable goods, for example, automobiles, refrigerators, etc.  This explains the development of a camera with a built-in coupled exposure meter, which proved to be a Continue reading
The Concept of New Product Development
Definitions of New Product Development New Product Development is a process which is designed to develop, test and consider the viability of products which are new to the market in order to ensure the growth or survival of the organization. New Product Development can be defined as the process of innovating and inventing new ideas and concepts, with a view to developing a successful new product in the anticipation of customer needs. The new product development can be defined as the term used to describe the complete process of bringing a new product or service to market. There are two parallel paths involved in the new product development process. The first involves the idea generation, product design and detail engineering whereas the other involves market research and marketing analysis. Basically, Companies typically see new product development as the first stage in generating and commercializing new products within the overall strategic Continue reading
Introduction to Market Segmentation
Market is composed by the customers and sellers, and different customers may have different needs, characteristics, behavior or buying attitudes. Each customer is a separate entity, they have unique wants. Therefore, sellers may divide a market into different groups of individual markets. Every consumer group is a market segment, each segment are the tendency of buyers with similar wants or needs. They divide the market into distinct groups who have distinct needs, wants, behavior or who might want different products and services. This action is known as marketing segmentation. The modern concept of market segmentation was put forward by Phillip Kotler, who states that market segmentation is the “sub dividing of a market into homogenous subsets of customers, where any subset may be conceivably be selected as a market target to be reached with a distinct marketing mix“. It is a concept in economics and marketing. Marketing segmentation is marketers Continue reading