Strategic planning is a general business process. It guarantees an organization maintains lead over its competitors with the help of strategies for market leadership. Michael Porter defined three strategies for firms at the business level: overall cost leadership, differentiation and focus strategies.Every organization may find unique strategies for developing competitive approaches. Some firms fail to follow one of the generic strategies because of their narrow-minded approach, such firms are usually said to be stuck in the middle.Cost Leadership: It is about decreasing the economic cost to the organization of delivering products and services. It means minimalizing the costs below that of the competitors.
Companies achieving Cost Leadership need capital to invest in technology bringing down costs efficiently. We need great returns on investments.Differentiation: Differentiation means manufacturing the products or providing the services different and more attractive than the competitors. Firm has unique dimensions. It makes the buyers prefer the company. High revenues are expected.
Organization needs good research quality and ability to deliver high quality products and services. This strategy is suitable when the target customer is not price-sensitive, there is competition and customers have detailed needs which are possibly under-served.Focus Strategies: Companies use focus strategies on niche markets. It selects a segment or group from the industry, understand the dynamics of the market and develop low cost products. The concentration is only on this particular selected market. This creates strong brand loyalty in the customers keeping the competitors away.
Focus strategies are usually Cost Focus or Differentiation Focus for success of a generic plan.