Mutual Exclusiveness of Generic Strategies Essay

Mutual Exclusiveness of Generic Strategies - Essay Example Thus, a firm that seeks cost leadership must explore all avenues that will guarantee its cost advantage in the industry. For a firm to achieve differentiation advantage over its competitors, it must come up with the necessary measures to produce a unique service or product that is valued by the customers to the extent of foregoing a relatively cheaper service or product offered by the firm’s competitors to buy from the firm at a higher price (Dahlen, 2006). Therefore, cost leadership and differentiation strategies define two fundamentally different approaches to business strategy given that a firm competing on low cost is discernible from that competing through differentiation evident from their different organizational characteristics, market poisoning, capabilities and resources (Grant, 2010). Michael Porter pooled differentiation and cost leadership with the firm’s choice of scope to constitute the generic strategies that a firm can use to achieve high profit margins . According to Porter, cost leadership and differentiation are mutually exclusive strategies to the extent that firms that endeavor to practice both strategies are stuck in the middle. Further, Porter defines a firm that is stuck in the middle as one with a guaranteed low profitability since it losses the high volume customers who demand low prices or has lowered its profits so that it can attract customers from those firms offering lower prices. The firm that is stuck in the middle loses its high-end customers who have high margin targets in their mind or have generally achieved differentiation. Such a firm would also lack a well-defined corporate culture in addition to having an incompatible set... This essay has looked at what is covered under cost leadership and differentiation as the two most important components of generic strategies. The following parts of the essay have looked at why it is possible for firms to implement both cost leadership and deferential generic strategies successfully. The paper has highlighted as a case example the strategic approach employed by Toyota which is an industry leader in automobile industry as a major example of how combining the two strategies is possible. The changes in market environment in areas like demand and supply calls for firms that need to keep up with modern trends to diversify their strategic approaches. Evidence from contingency approach to human resource management has been presented to oppose the mutual exclusive view of generic strategies. This paper makes a conclusion that the fear that firms employing both strategies simultaneously run the risk of being stuck in the middle, not knowing which of the two to concentrate on, has also been dispelled. Last part has presented a brief analysis detailing why the concepts as detailed by Porter needs further scrutiny. This analysis assists in place Porters ideas in the context of practical business environment as opposed to the theoretical framework under which Porter postulated the two strategies. Therefore, this essay has succeeded in proving that Cost leadership and differentiation generic strategies are not mutually exclusive but are approaches that business organizations can take advantage of to achieve greater margins in terms of their profits.