Management Essay on Porter’s Generic Strategy
Task: Write an essay explaining the Porters generic strategy for management with the help of examples from real-life businesses.
As the subject of study, the author selected Porters Generic Strategy in management and has conducted a thorough analysis on the said topic. Business organizations adopting Porters Generic Strategy are seeking strategic approaches to gain and retain market advantage as the rivalry between companies and industries becomes more and more severe. In Porters Generic Strategy of management, this study concentrates on the Cost Leadership Approach.
Strategy in terms of Business Management
Strategy, as a route of administration, would become important in a circumstance in order to accomplish a specific objective if the options available are not adequate. A strategy is far more than a variety of processes, as per Waters (2006), and it encompasses all of the variables that influence long-term success. Strategy can, therefore, be described as effective use of assets needed to accomplish the primary objective.
A strategy is often the long-term course or objectives of the organization to increase productivity within the demanding environment for the organization or a company, to achieve the business goals and to protect the interests of consumers. "Strategy is a traditional research for an implementation plan that develops and compounds a positive return on investment" (Montgomery 2002). There are 3 strategic management stages, which are Corporate Strategy, Market Strategy, and Core Competence.
In domains of similar operations, Organizational Planning evaluates and assesses market opportunities. Thompson (2010) claimed that this approach is the course and unique method that numerous organizations have chosen in their pursuit for differentiation, competition and performance. Organizational planning is concerned with the organization's priorities and how to handle the company. The method is often used to decide where it would be appropriate to localize competitiveness in the business.
Marketing strategy is to decide how an enterprise can perform in its sector. "Marketing strategies are primarily targeting tactics, as per Kumar (2010), whereby companies are likely to establish an image and reputation in the world for itself." In order to achieve a competitive edge in the industry, it is intended to determine rivals. Furthermore, this technique is used to predict the needs and expectations of customers and technology. It has also been used to impact competitors by given opportunities.
The degree of operational departments and units are known as Functional Strategy. It focuses primarily on running and implementing company strategies and marketing strategy decisions. As per Kumar (2010), "In influencing the effectiveness of these other tactics, this stage of the process is absolutely crucial as it integrates business decisions into strategy formulation by directly affecting the layout of organizational functions and channels, personnel and other assets, etc."
Porters Generic Strategy of Management
The Porters generic strategy is a classification of approaches composed of 3 general kinds of techniques, many of which are utilized by corporations to gain and retain the comparative advantage. Focus strategy, cost leadership and differentiation are the three main types of strategies as in Porters generic strategy in management.
The focused approach in Porters generic strategy in management consists of a basic sector and aims to stay ahead of the competition within that sector. The organization typically focuses on very few market segments to accommodate various audiences with specialized needs while implementing a focus strategy. Because of the corporation's limited segment orientation, the number of goods would be small, so producers and consumers would have less negotiating power. An organization that uses focus tactics experiences a greater level of service quality.
The Haagen-Dazs firm will be a prime illustration of the focused approach. Haagen-Dazs is a company of premium ice cream that was founded in 1961. Haagen-Dazs developed, studied, and finally mastered the richest ice-cream in the global economy. Focusing on the ice-cream market, Haagen-Dazs made the company the most profitable premium ice-cream business in a handful of years. Over the decades, Haagen-Dazs concentrated on the market to ensure quality growth.
Cost Leadership Strategy
Cost leadership is one technique of Porters generic strategy in management in the specified sector of the market that has the least operating costs and the lowest prices. In every industry, the relatively cheap leader enjoys the comparative benefits of being easy to manufacture at the lowest possible cost to so many other. The company will compete with other businesses and get huge returns when an organization conducts this approach. Price-sensitive consumers will prosper from this.
Companies adopting the cost leadership approach would have high-efficiency levels and high utilization potential. The policy was adopted by Air Asia, the low-cost aviation leader. As a low-cost company, Air Asia is well established. Air Asia closed off freebies and airline meals during a brief journey. It has upgraded its aircraft to the Airbus A380, which offers upwards of 1,000 seats. The massive aircraft amplified minimal journeys for travellers.
The technique of differentiation is a tactic of Porters generic strategy that distinguishes a company and its products from those in a similar sector. It is to achieve high performance that is exclusive to clients and respected by them. Since there are unique expectations from clients, the distinction is necessary. The standard value would be raised as the goods or services become special. There are also possibilities that competitors will imitate the distinction, and it should be a benefit in the market.
The Coca-Cola Corporation is a strong argument for distinction. The new and distinctive preparation for Coca-Cola was developed in the 19th century. All throughout the period, the original formula has not been replicated. Another business which has a policy of differentiation is Apple Inc. In the tech world, the Apple Company has made great inventions. The iPhone, MacBook, iPad and iPod have had a huge influence on computer industry advancement. Those distinctive Apple devices confirmed that the company became the runaway success in the consumer electronics sector.
Advantages and Disadvantages of Porters Generic Strategy
The primary benefit that different organizations might achieve is gaining a competitive advantage through using Porters Generic Strategy. Organizations that adopt cost leadership strategies would benefit from their goods with a significantly higher margin. Lowering the cost of manufacturing would lead to higher profits, even though goods are sold at a standard value. In the trade war for goods, companies may achieve advantages. The demand from consumers for a unique product would be far less flexible than for rivals' goods. The strategy of specialization can also add an enormous obstacle to the entry into the market for entrants. The focused approach consists of small expenditure in assets, and the specialization offered by the companies could support the corporations. A tremendous amount of client satisfaction can be enjoyed by companies that implement focus strategies.
Porters generic strategy in management is beneficial, but it does have its limitations. The cost control technique implemented by a company could potentially be replicated by rivals. Consumers with low loyalty are a threat to this technique. If there is a commodity at a discounted rate, clients will prefer it over the other. Competing companies will be able to exceed manufacturing capacity as technology advances. The strategy of specialization would entail greater costs. Contenders can have the things copied and the distinction eliminated. Price-sensitive clients will opt for value instead of individuality. As its only limited focus, organizations that employ focused approach have restricted potential for development. It disregards the size of the markets which would be accessible from the wider market.
Research Sector and Organizations
For the specific purpose of this Porters Generic strategy study, the airline industry has been chosen as it reflects the best application of its three approaches. For a previous couple of decades, the aviation sector has been rising steadily as individuals become more willing to travel by aircraft. And of flyers, known as low-cost flights, seem to have been able to produce revenues and strong influence throughout these years, as per Cento, by cultivating a cost advantage, and a range in the network pricing structure. The airlines, namely Air Asia and Firefly Air, have been chosen for this study.
Consumer Satisfaction in the Aviation Sector
Service standards are the value that serves as benchmarks or descriptors by which performance is evaluated in accordance with best practice. In the aviation sector, clients expect positive facilities to be offered. Consumers want to get reserved seats at the cheapest cost. Clients demand the check-in period to be minimal. There seems to be a long time to wait at the check-in desks at most airports. Consumers are not happy to expend their waiting period. People require the terminal to be easily reachable. In order for it to be convenient to enter the terminal, they want to have transportation offered by the airline. Consumers expect to have convenient access to the terminal. When flying by aircraft, people require having affordable meals and drinks. In order to minimize exhaustion on long haul journeys, customers would like to have snacks on the aircraft. Consumers would perceive aeroplane seats to be spacious and prefer that flight crew will be friendly throughout the journey.
Performance of Firefly and Air Asia with respects to consumer expectations
Air Asia offers flights for cheap rates. In order for consumers to not have to stay for a longer line at the check-in desk, Air Asia offered an online check-in facility. For travellers who are at a longer distance from the area, Air Asia offer affordable taxi rentals. As Air Asia understood that the relationship with service quality is a long-term achievement, the flight crew in the aircraft is warm and friendly to the travellers.
FireFly Airline has fared for clients at a very reasonable price. In order to prevent long queues that would disappoint clients, FireFly has an online check-in feature on its platform. The FireFly aeroplane seats are big and relaxing. Travellers appreciate nutritious food and drinks when served by the friendly flight crew aboard a Firefly aeroplane. In addition, FireFly flight performance is a long-term achievement as FireFly recognizes the connection here between fulfilments of passengers.
Comparison between Firefly and Air Asia
The common characteristics of Air Asia and FireFly were that the consumers have the lowest possible price for both entities. They also offer clients online check-in facilities so that clients do not have to line up and stand for long periods only to check-in for their flights.
The distinctions amongst Air Asia and FireFly are that Air Asia offers taxi rental services, but the facility is not offered by FireFly. Air Asia aeroplane seats are upright and cramped, but FireFly aeroplane seats are big and relaxing. FireFly supplies customers with free refreshments on a long trip, but Air Asia has snacks for sale on the flight.
The weakness of Air Asia in terms of Consumer satisfaction
Air Asia has the cheapest airline fares. Customers were delighted that they can always fly at a low rate. Consumer's online check-in facility might have pleased consumers as they don't have to wait longer in a line. Owing to their likeability and modesty, travellers felt pleased with Air Asia's flight service.
Air Asia doesn't provide travellers with refreshments in order to save costs. Clients feel disappointed as on a long trip; they are unable to purchase overpriced food in flights. Air Asia seating is upright and is quite cramped. This can cope with a significant level of exhaustion on their bodies in a long haul flight.
The weakness of Firefly in terms of Consumer Satisfaction
FireFly has an aircraft with a minimized cost. Since they could fly at a slightly lower rate, customers felt pleased. Consumers are delighted and fulfilled with the online check-in facility since they do not have to queue up for check-in. Since they could get complimentary refreshments on the flight, commuters felt pleased. Also, with reclining chairs offered by FireFly, travellers are pretty satisfied. Owing to their friendly nature and cordiality, travellers were pleased with FireFly's flight presence.
Firefly doesn't offer any clients with taxi rental options. Consumers living very far from the airport were unable to access the terminal conveniently. Consumers would be disappointed. In addition, only one FireFly airport exists. As the connectivity to FireFly airports is poor, consumers feel upset.
The writer is more conscious of business strategy after researching Porters Generic Strategy. The study explored the porters generic strategy and analyzed its different business approaches. It is used to optimize an organization's success in the business. Any company may acquire a somewhat competitive position in the industry with the help of Porters Generic Strategy. Not every company, although, is capable of executing three methods. A particular form of approach will have to be implemented by different companies in different industries.
The manager may make some assumptions before choosing which approach would be the most appropriate for an enterprise. The very first concern would be, "Do we operate on a limited price basis, and could we distinguish between market and the ability to benefit more?" Moreover, the next concern would be, "Do we contend for market dominance head-to-head with our fiercest competitor, and must we concentrate on just a lucrative product category?"
The selection of the approach to be adopted is important as it will impact the business in many ways, according to the study. Organizations must evaluate their advantages and disadvantages and select the most suitable approach as per the structure of the enterprise.
In light of this study on Porters Generic strategy, both businesses would do well in fulfilling expectations of consumers. As for Air Asia, the airline may offer travellers aboard with some complimentary snacks, such as baked goods or sugary beverages. It will make travellers feel comfortable. It is very costly to produce snacks and beverages on Air Asia. Air Asia may decrease the cost of refreshments. Apart from that, Air Asia's taxi rental service is quite expensive. There may be some attempt by Air Asia to change the taxi hire cost.
As per Porters Generic strategy, FireFly Airline may offer cab facilities, including such cab rentals for clients. While FireFly is situated near the city, taxi transportation facilities are for residents who live farther from the city. In a way to lure more clients, including certain promotional offers, FireFly might do a little advertising.