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Contents
Question 1 Porter generic strategies
Page 3
Question 2 Components of a vision and mission statement
Page 5
Question 3 Alternative strategies
Page 10
Question 4 Value chain analysis, different functions of management
Page 14
Question 5 Value of resources, the resource based view
Page 20
Research / Bibliography
Page 23
Question 1
Michael Porter is considered the mastermind of competitive strategies application. Starting
in the early 1980s, he published three books that developed and outlined successful
strategies and how to apply them. His most popular books cover his three theories of
generic strategy, cost leadership, differentiation, and focus.
The first generic strategy is cost leadership where a firm organises its value adding
activities so as to be the lowest cost producer of a product or service in its industry.
The product does not need to be special or different; instead, the attractiveness to the
consumer is the price. For instance, Shoprite employs a cost leadership strategy. Its stores
are very basic, located in low rent areas and carry a limited range of products. This enables
the company to charge a lower price than competitors.
Firms that focus on applying cost leadership must work to cut down on costs in all areas;
by combining and sharing resources already in-house. Using firm leverage across all
departments is also a strong cost-saving measure, and cutting back on waste must be a
company-wide goal. Another angle to costs advantages would be to improve process
efficiencies, and to make wise outsourcing decisions. A strong point of this strategy is
gaining market share by charging lower prices than the competitors, whilst the main weak
point would be competitor-copying, (due to high research and development costs) meaning
an overall lowering of price across the market.
The second strategy is differentiation, which emphasises the creation of unique product or
service features which persuade customers that it is superior to competitors offerings.
Differentiation is based upon organising value chain activities in such a way as to create
differentiated products or services. If the market is flooded with similar products at similar
prices, a means of drawing business would be to create a more specific product that would
draw consumers willing to pay a higher price for a better-developed product. This strategy
can only be implemented with the involvement of highly paid scientists and designers as
well as the strong coordination of the research and development and marketing functions
of the company.
Differentiation can be achieved by developing superior products on the basis of their
design, performance, after sales service and distribution channels. Success in this strategy
