STRATEGIC

MANAGEMENT
 Circle of Knowledge

• Must know
• Should know
• Would like to know
• Nice to know
• Should not know !
 PLANS ARE NOTHING!...

PLANNING is Everything!

•Shared Vision
•Participation
•Ownership
•Loyalty
MULTIPLE HEADS
SYNDROME
MIS
Fin
Oper.
R&D Shared
Vision
Legal
Adm.
HR
Managerial Pyramid
Chairman

Top Managers
President
Middle Managers
Dean
First-Line Managers

Non- Managerial Employees

Professors
Organizational Levels
 Strategic Planning Versus Operational Planning

Strategic Planning Operational Planning

Time Frame 5-7-10 years 3 months – 1 year

Management Scope Macro Micro
Responsibility Top level Middle / 1st line
Details Low High
Uncertainty High Low
Main Question What How
Sequence 1st 2nd
Setting objectives End Start
Main Environment External Internal
 STRATEGIC THINKING
 When NASA first started sending up
astronauts, they quickly discovered that
ball-point pens would not work in zero
gravity. To combat this problem, NASA
scientists spent a decade and $12
million developing a pen that writes in
zero gravity, upside down, on almost any
surface and at temperatures ranging
from below freezing to over 300 C.

❑The Russians used a pencil.

 What is
MANAGEMENT?

▪ It is an ART.
▪ It is a SCIENCE.
▪ It is Decision Making.
▪ It is Getting Things Done.
 What is
MANAGEMENT?
▪ It is achieving Objectives through others.

Managers are not doers

 What is
MANAGEMENT?

▪ It is achieving objectives with others.

 What is
MANAGEMENT?
▪ Management is the process of
achieving organizational goals by
engaging in the four major functions of
planning, organizing, leading and
controlling.
▪ Management process is the set of
ongoing decisions and work activities
 Management Styles
• Management By Objectives (MBO)
• Management By Walking Around (MBWA)
• Crisis Management (CM)
• Management By Crisis (MBC)
• Strategic Management (SM)
• Management By Blessing (MBB)
• Management By Conspiracy (MBC)
 STRATEGIC MANAGEMENT

The origin of the word “STRATEGY” is:

STRATEGOS
In Greek, it means “Leader of an army”
 What is a Strategy?

It is the science of maneuvering forces into

the most advantageous position prior to
actual engagement with the enemy.

Webster”s Dictionary
Business Strategy
Vs.
Military Strategy
Military Conflict Vs.
Business Competition
 STRATEGIC MANAGEMENT

What is Strategic Management?

It is the art and science of formulating, implementing ,

and evaluation cross functional decisions that enable an
organization to achieve its long-term objectives.
Fred R. David
 STRATEGIC MANAGEMENT

What is Strategic Management?

It is the analyses, decisions and actions that an

organization undertakes in order to create and sustain
competitive advantages.
What is Strategy?

We are the blind people and

strategy formation is our elephant.
Henry Mintzberg
 What is Strategic Situation?
“Involving two or more participants, each
trying to influence, to outguess, or to adapt to
the decisions or lines of behavior that others
have just adopted or are expected to adopt”.

Thomas Schelling
 Why Strategic Management
If you do not know where
you are going then any road
will lead you there!.
COMMON CHARACTERISTICS
OF ORGANIZATIONS

- People
- Structure
- Goals
ORGANIZATIONAL GOALS

Survival
Profit
Growth
 STRATEGIC
MANAGEMENT
Stages of Strategic Management?

Planning
Implementation
Evaluation
 Why Strategic
Management?
The process , rather than the
decision or the document, is the
more contribution of strategic
management.
 Change Management
&
Strategic Management
In today’s business environment, more
than any preceding era, the only constant
is change.
 Anatomy of Strategic Planning

DREAM

ROLE Top down

NEVER
Bottom up
SITUATION
ANALYSIS

LONG-TERM
OBJECTIVES

Directions/Competitive Edge Strategic Planning

SHORT-TERM Operational Planning
GOALS
 FOUR MANAGERIAL QUESTIONS

How to know that

we have arrived?
Where are we?

Where should
we go?
How to go
there?
 The Vision Statement answers
the question of
“What do we want to become?”…
It is the DREAM
The DREAM

❑Right Hemisphere of the brain

❑May be unrealistic
❑No available resources
❑No time frame
❑No commitment to achieve it
❑Precedes the mission statement
❑Can not buy, sell, borrow or rent
• Leaders have much more in common with
artists than they do with managers
 The DREAM

❑Vision needs the

courage to dream
IF YOU DO NOT HAVE A VISION
… DO NOT LOOK FOR IT!

Dr. Sameh . El-Namaki

Maastricht School of Management

 The DREAM

❑Vision needs the courage to dream… It needs LEADERSHIP

ONE MAN WITH COURAGE

IS A MAJORITY

Thomas Jefferson (1743-1826)

The third president of USA
 Strategic Leadership
❑“Some men see things as they are
and say ‘Why?’ I dream things
that never were, and say ‘Why
not’?”
• The reasonable man adapts himself to the
world; the unreasonable one persists in trying
to adapt the world to himself. Therefore, all
progress depends on the unreasonable man.

George Bernard Shaw

(1856-1950)
Irish dramatist, a socialist spokesman,
leading figure in the 20th century theater
“Imagination is more important
than knowledge, because knowledge
is limited whereas imagination
embraces the entire world.”
Albert Einstein
 The DREAM

❑“Without execution, vision is just

another word for hallucination”
Mark Hurd, HP’s CEO
The DREAM

❑The ability to
communicate the dream
 The DREAM
❑“Vision is an essential element of the leader’s job. But no
vision is worth the paper it’s printed on unless it is
communicated constantly and reinforced with rewards.”
Jack Welch “winning”
 “I HAVE A DREAM TODAY...
that my four little children will one day live in a
nation where they will not be judged by the color
of their skin but by the content of their character”

Martin Luther King, Jr.

1929 - 1968
A BOY AND HIS COMPUTER

When Michael Dell entered college on 1983,

as a pre-med student, he had already been
bitten by the entrepreneurial bug. At the
time, personal computers were just making
their entrance into main stream. Michael
saw them as the wave of the future.
A BOY AND HIS COMPUTER

During his freshman year, he By the second

realized he could buy semester of his
computer parts direct from the freshman year,
manufacturers, assemble the
computer himself, and then Michael was grossing
sell them directly to consumers $80,000 from his dorm
for 40% below retail. room.
Jeff Bezos
 JEFF BEZOS
• He entered Princeton
University planning to
study physics, but
soon returned to his
love of computers,
and graduated with a
degree in computer
science and electrical
engineering.
THE DREAM
 Let’s Google It

Google Boys:
Two brainy Stanford PhD dropouts- Larry Page
and Sergey Brin
 Let’s Google It
Google has become the world’s most
popular Web search engine., conducting
upward of 200 million researches everyday.

Google has been translated

into 97 languages
Welcome to the world of social business,
where the creative vision of the
entrepreneur is applied to today's most
serious problems: feeding the poor,
housing the homeless, healing the sick,
and protecting the planet. Creating a
World without Poverty tells the stories of
some of the earliest examples of social
businesses, including Yunus's own
Grameen Bank. It reveals the next phase
in an economic and social revolution that
is already underway and in the
worldwide effort to eliminate poverty by
unleashing the productive energy of
every human being.
I.Q.
 EQ.
Emotional
Intelligence
Anatomy of Strategic Management

Top down
NEVER
Bottom up

Strategic Planning

Operational Planning
 Anatomy of Strategic Planning

DREAM

ROLE Top down

NEVER
Bottom up
SITUATION
ANALYSIS

LONG-TERM
OBJECTIVES

Directions/Competitive Edge Strategic Planning

SHORT-TERM Operational Planning
GOALS
 VISION
Amoco will be a global business enterprise,
recognized throughout the world as the preeminent by the
employees, customers, competitors, investors and the public.
We will be the STANDARDS by which the other businesses
measure their performance. Our hallmarks will be the
innovation, initiative and teamwork of our people and our
ability to anticipate and effectively respond to change and to
create opportunity.
 VISION
TUV AKADEMIE
BMW VS. MERCEDES

We WILL be the STANDARDS (BMW)- Vision

Vs.
We ARE the STANDARD (Mercedes) - Mission
 •What is our business?
•Statement of purpose that distinguish our
business from other similar businesses.
•It is the foundation for priorities, strategies,
plans and assignments.
•It is the starting point in business.
 • The mission of a company is the unique
purpose that sets it apart from other
companies of its type and identifies the scope
of its operations.
•The mission statement is a message
designed to be inclusive of the expectations
of all stakeholders for the company’s
performance over the long run.
• Components of a mission statement:
– Customers
– Products - Industry
– Markets
– Technology
– Beliefs and values (confidentiality, religious)
– Competitive edge (technology, quality, price)
– Public Image - Suppliers
– Concern for employees
– Environment (ecology – pollution)
• VALUES:
• could be part of the components of a mission
statement or under a separate title:
– Fact-based: decision based on facts and data
– Objectivity: rational thinking to achieve goals
– Independent thinking: it leads to creativity
– Integrity: to act consistently with our principles
– Productivity: by taking the actions necessary to
accomplish the mission,
– Fairness: Those who contribute the most toward
accomplishing the mission, should receive the most.
– Pride: It is a psychological reward we earn from living
by our values (integrity, objectivity, fairness,…etc)
– Teamwork
 • The mission of a company is the unique
purpose that sets it apart from other
companies of its type and identifies the scope
of its operations.
•The mission statement is a message
designed to be inclusive of the expectations
of all stakeholders for the company’s
performance over the long run.
• “Somehow, they haven’t heard the mission,
maybe because it wasn’t shouted in their
direction, loud enough or often enough. Or
maybe their rewards weren’t aligned”
Life Cycle of the Organization

Product Development Cost-

reduction

Sales/ Services Quality

Quantity

Start Growth Maturity Decline

TIME
 ORIENTATION
• PRODUCT ORIENTED • CUSTOMER ORIENTED
– Offer things – Offer ideas, feelings,
emotions, benefits
– We offer quality clothes – We offer attractive look
– We offer handmade – We offer comfort to
shoes your feet and the
pleasure of walking
– We offer the top twenty – We offer the leisure
and sound of music
– We offer the best seller – We offer hours of
books pleasure of reading
and knowledge
 HOW TO ASSESS A
MISSION STATEMENT
Credibility
Clarity
Life Cycle
Orientation
Length
Components
 MISSION STATEMENT
Pfizer, Inc.
• Pfizer, Inc. is a research-based, global health
care company. Our principal mission is to apply
scientific knowledge to help people around the
world enjoy longer, healthier and more
productive lives. The company has four
business segments:health care, consumer
health care, food science and animal health.
We manufacture in 39 countries, and our
products are available worldwide.
 MISSION STATEMENT
MERCK
•The mission statement of Merck is to provide
society with superior products and services-
innovations and solutions that improve the
quality of life and satisfy customer needs – to
provide employees with meaningful work and
advancement opportunities and investors with
a superior rate of return.
Anatomy of Strategic Management

Top down
NEVER
Bottom up

Strategic Planning

Operational Planning
 Anatomy of Strategic Planning

DREAM

ROLE Top down

NEVER
Bottom up
SITUATION
ANALYSIS

LONG-TERM
OBJECTIVES

Directions/Competitive Edge Strategic Planning

SHORT-TERM Operational Planning
GOALS
SWOT
 SWOT
Effect +ve -ve

Environment

External O T

Internal S W
 SWOT

Opportunities: is a major favorable situation in a firm’s

environment: breakthrough technology, improved supplier
relationships, changes in regulatory circumstances,
technological changes or identification of a previously
overlooked market segment.
 SWOT

Threats: is a major unfavorable situation in a firm’s

environment: entrance of new competitors, slow market
growth, increases bargaining power of key suppliers,
technological changes, and new or revised regulations .
 SWOT

Strengths: is a resource advantage relative to competitors

and the needs of the markets a firm serves or expects to
serve.
 SWOT

Weaknesses: is a limitation or deficiency in one or more

resources or competencies relative to competitors that
obstructs a firm’s effective performance.
Overview
Political Social
Economi
c

Ecology Legislation Population

Education Technology
Inter
national
• The major forces outside the organization
that have the potential to significantly
influence the likely success of products or
services
• The broad conditions and
trends in the societies in which
an organization operates
• Because these elements reflect
major trends and conditions existing
outside the organization, they tend to
be beyond the ability of a single
organization to affect or to alter
directly, at least in the short run.
 EXTERNAL ENVIRONMENT

- POLITICAL FACTORS
ELEMENTS OF - ECONOMIC FACTORS
MEGA ENVIRONMENT
PEST ANALYSIS - SOCIAL FACTORS
•Political - TECHNOLOGY
•Economic
•Social - LEGISLATION
•Technology - DEMOGRAPHY
- ECOLOGY
EXTERNAL ENVIRONMENT
SOCIAL FACTORS
• Willingness for education
• Level of education
• Religious values and commitment
• Women Status
• The value of time
• Marriage and Divorce ratios
• Family ties and value
• Spending leisure time
 EXTERNAL ENVIRONMENT

- POLITICAL FACTORS
ELEMENTS OF - ECONOMIC FACTORS
MEGA ENVIRONMENT
PEST ANALYSIS - SOCIAL FACTORS
•Political - TECHNOLOGY
•Economic
•Social - LEGISLATION
•Technology - DEMOGRAPHY
- ECOLOGY
EXTERNAL ENVIRONMENT
SOCIAL FACTORS
• Willingness for education
• Level of education
• Religious values and commitment
• Women Status
• The value of time
• Marriage and Divorce ratios
• Family ties and value
• Spending leisure time
EXTERNAL ENVIRONMENT
ECONOMIC FACTORS
• Income per capita
• Rate of inflation
• Saving tendency
• Rate of exchange
• Per capita spending for transportation
• Per capita spending for traveling
• Taxes
• Interest rate
• The specific outside elements
with which an organization
interfaces in the course of
conducting its business.
• The specific outside elements
with which an organization
interfaces in the course of
conducting its business.
 TASK ENVIRONMENT

COMPETITORS➢
- SUPPLIERS
- CUSTOMERS
- LABOR FORCE
- ALTERNATIVE PRODUCTS
& SERVICES
- Potential Competitors
 EXTERNAL ENVIRONMENT

WHEN THE CHINESE WRITE

THE WORD “CRISIS”, THEY DO
SO IN TWO CHARACTERS –
ONE MEANING DANGER, THE
OTHER OPPORTUNITY
• The general conditions that exist
within an organization
 INTERNAL ENVIRONMENT

- CORPORATE CULTURE
- PUBLIC IMAGE
- INTEGRATION WITHIN THE
ORGANIZATION’S
DEPARTMENTS AND UNITS
 INTERNAL ENVIRONMENT

* FINANCE
* MARKETING
* HRM
* R&D
* ADMINISTRATION
* OPERATIONS/SERVICES
* LOGISTICS
 INTERNAL ENVIRONMENT

RESOURCE-BASED VIEW(RBV)
A core competence is a capability or skill running
through a firm’s business that once identified,
nurtured and deployed throughout the firm
became the basis for lasting competitive edge.
RBV emerged as a way to make the core
competence concept more focused and more
measurable – creating a more meaningful
internal analysis.
 INTERNAL ENVIRONMENT

RESOURCE-BASED VIEW(RBV)
THREE BASIC RESOURCES:
1. Tangible assets:
2. Intangible assets
3. Organizational capabilities
 INTERNAL ENVIRONMENT

RESOURCE-BASED VIEW(RBV)
THREE BASIC RESOURCES:
1. Tangible assets: are the easiest to
identify and are often found in the
firm’s balance sheet. They include the
production facilities, raw material,
financial resources, real estate, and
computers
 INTERNAL ENVIRONMENT

RESOURCE-BASED VIEW(RBV)
THREE BASIC RESOURCES:
2. Intangible assets: are things like brand
names, company reputation,
organizational morale, logistics, corporate
culture, technical knowledge, trademarks,
and accumulated experience within an
organization. While they are not assets
that you can touch or see, they are very
often critical in creating competitive
advantage.
 INTERNAL ENVIRONMENT

RESOURCE-BASED VIEW(RBV)
THREE BASIC RESOURCES:
3. Organizational capabilities: are not specific
inputs like tangible or intangible assets rather,
they are the skills-the ability and ways of
combining assets, people and processes – that
a company uses to transform inputs into
outputs (eg. Dell built its first 10 years of
unprecedented growth by creating an
organization capable of the speedy and
inexpensive manufacture and delivery of
customer-built PC
 INTERNAL ENVIRONMENT

RESOURCE-BASED VIEW(RBV)
WHAT MAKES A RESOURCE
VALUABLE?
1. Competitive Superiority
2. Resource Scarcity
3. Inimitability: Is the resource easily
copied or acquired?
4. Appropriatability
5. Durability
6. Sustainability
GRAND STRATEGIES
• A- Integration Strategies
• B- Intensive Strategies
• C- Defensive Strategies
• D- Diversification Strategies
• E- Combination
GRAND STRATEGIES
• A- Integration Strategies
1. Backward Integration
2. Forward Integration
3. Vertical Integration
4. Horizontal Integration
 GRAND STRATEGIES
• A- Integration Strategies
1. Backward Integration:
Seeking ownership or increased control of firm’s
suppliers.
It is especially appropriate when a firm’s current
suppliers are unreliable, too costly or can not
meet the firm’s needs.
 GRAND STRATEGIES
• A- Integration Strategies
1. Backward Integration Vs. Outsourcing
Outsourcing is De-integration which makes sense in
industries that have global sources of supply.
In outsourcing, companies use outside suppliers, shop
around, play one seller against another and go with the
best deal. Outsourcing is becoming widely practiced.
 GRAND STRATEGIES
• A- Integration Strategies
2. Forward Integration:
Gaining ownership or increased control over
distributors or retailers.
 GRAND STRATEGIES
• A- Integration Strategies
3. Vertical Integration
 GRAND STRATEGIES
• A- Integration Strategies
4. Horizontal Integration:
Seeking ownership or increased control over
competitors
 GRAND STRATEGIES
• A- Anti-Integration Strategies
4. Outsourcing
Let others do what we – under normal
circumstances – should do
• B- Intensive Strategies

INCEASE MARKET SHARE FOR PRESENT PRODUCTS/ SERVICES IN

PRESENT MARKETS THROUGH GREATER MARKETING EFFORTS
This strategy is widely used alone and in combination with other strategies.
How to dot it?
• Increasing the number of salespersons
• Increasing advertising expenditure
• Offering extensive sales promotion items
• Using celebrities!
 • B- Intensive Strategies

3%
A
Why is it a very aggressive strategy? 28%
25%
(taking the increase in your market share from others’ share) 35%
D 12%
18% B
C
 • B- Intensive Strategies
Guidelines for situations when particular strategies are more effective

When to use market penetration?

•When your market is not saturated with your product or service
•When the usage rate of present customers could be significantly
increased
•When the market shares of major competitors have been declining
while total industry sales have been increasing
•When increased economies of scale provide major competitive
advantage
• B- Intensive Strategies

• INTRODUCING PRESENT PRODUCT OR

SERVICE INTO NEW GEOGRAPHIC AREAS.
• In 1995, Pepsi spent 500 million dollar in Poland
alone to combat Coke which has gained 35%
market share through out eastern Europe.
• It is going to be hard to maintain a competitive edge
by staying close to home.
 • B- Intensive Strategies

Guidelines for situations when particular strategies are more effective

When to use market development?

• When new channels of distribution are available that
are reliable, inexpensive, and of good quality
• When new unsaturated markets exist
• When an organization has excess production capacity
• When an organization’s basic industry is rapidly
becoming global in scope.
 • B- Intensive Strategies

SERVICE / PRODUCT DEVELOPMENT BY ADDING NEW OR EXTRA FEATURES

TO AN EXISTING PRODUCT. (Mobile, Potatoes)
It seeks sales by improving or modifying present products/ services
Product development usually entails large research and development expenditure

Non Alcoholic Beer

 • B- Intensive Strategies
Guidelines for situations when particular strategies are
more effective
When to use product development?
•When an organization has successful products that are in
the maturity stage of the product life cycle
•When an organization competes in a high-growth industry
•When an organization has especially strong research and
development capabilities.
•When major competitors offer better quality products at
comparable prices.
C- Defensive Strategies
8. Retrenchment (Cost Reduction/ Economizing)
9. Divestiture (Partial Liquidation)
10. Liquidation
11. Joint Venture (Sony Erickson Mobile)
C- Defensive Strategies
8. Retrenchment (Reduction of expenditure)
It occurs when an organization regroups through
cost and asset reduction to reverse declining
sales and profits.
Sometimes, it is called turnaround or
reorganizational strategy.
It is designed to fortify an organization’s basic
distinctive competence.
C- Defensive Strategies
9. Divestiture (Partial Liquidation)
Selling a division or part of an organization.
It is used to raise capital for further strategic
acquisition or investment.
C- Defensive Strategies
10. Liquidation
Selling all of a company’s assets for their tangible
worth.
Liquidation is a recognition of defeat and
consequently can be an emotionally difficult
strategy.
However, it may be better to cease operating than
to continue losing large sums of money
C- Defensive Strategies
11. Joint Venture (Sony Erickson Mobile)
A popular strategy that occurs when two or more
companies form a temporary partnership or
consortium for the purpose of capitalizing on
some opportunity
 GRAND STRATEGIES
• D- Diversification Strategies
12. Concentric: new product, related (to
existing product) to the same customer
13. Horizontal: adding new product, unrelated
products to present customers
14. Conglomerate: unrelated, to any customer
 GRAND STRATEGIES
• D- Diversification Strategies
➢12. Concentric Diversification: Adding new but
related products or services
➢e.g. Dunlop (tires/ motor industry-------- racket balls/
sports industry), the same raw material (rubber)
 GRAND STRATEGIES
• D- Diversification Strategies
➢13. Horizontal Diversification: New but unrelated
products or services, for the present customer.
➢ e.g. Sony Corporation’s purchase of Columbia Pictures
Entertainment company (1994). Totally $3.4 billion, this
acquisition represented Japan’s largest entry ever into
U.S. entertainment industry.
 GRAND STRATEGIES
• D- Diversification Strategies
➢14. Conglomerate Diversification: New, unrelated,
to any customer
➢Antismoking campaign – liability suits – tobacco
consumption
➢Philip Morris ------------------------ Kraft, the world’s
second largest food producer behind Nestle ( for
$13 billion in hostile takeover in 1992)
 GRAND STRATEGIES
• D- Diversification Strategies
➢Conglomerate (business/ firm) Diversification:
New, unrelated product/ service, to any customer
➢GE manages more credit cards than American
Express
➢General Electric owns more commercial aircraft
than American Airlines!
 GRAND STRATEGIES
DIVERSIFICATION

“Management found they could not manage the beast”

Michael Porter of Harvard Business School
 GRAND STRATEGIES
MERGERS

A merger occurs when two organization of about equal

size unite to form one enterprise
“Merger mania”!
 GRAND STRATEGIES
ACQUISITION
An acquisition occurs when a large organization
purchases (acquires) a smaller firm, or vice versa.
When acquisition is not desired by both parties, it can
be called takeover or “hostile take over”.
 GRAND STRATEGIES
WHY ACQUISITIONS and MERGERS?
•To provide improved capacity utilization
•To make better use of existing sales force
• To reduce managerial staff
• To gain economies of scales
• To gain new technology
• To gain access to new suppliers, retailers and distributors
 GRAND STRATEGIES
COMBINATION
Many if not most, organizations pursue a combination
of two or more strategies simultaneously but a
combination strategy can be exceptionally risky if
carried too far.
No organization can afford to pursue all the strategies
that might benefit the firm. Difficult decision must
be made. Priorities must be made.
 GRAND STRATEGIES
COMBINATION
Organizations can not use all strategies because
resources and talents get spread thin and
competitors gain advantage.
In large diversified companies, a combination strategy
is commonly employed when different divisions
pursue different strategies.
 GRAND STRATEGIES
DIVERSIFICATION
“Put all your eggs in one basket
and WATCH THAT BASKET!
Mark Twain
 GENERIC STRATEGIES
MICHAEL PORTER
Many planners believe that any long-term strategy should
derive from a firm’s attempts to seek a competitive advantage
based on one of three generic strategies:
➢LEADERSHIP IN COST REDUCTION
➢DIFFERENTIATION
➢FOCUS
 GENERIC STRATEGIES
MICHAEL PORTER
➢LEADERSHIP IN COST REDUCTION
➢Unique capabilities to achieve and maintain low cost
position.
➢Such capabilities: having secured suppliers of scarce
raw materials, being in a dominant market share
position, excelling at maximizing economies of scale,
implementing cost cutting technologies, stressing
reduction in overhead administrative and in distribution
system expenses
 GENERIC STRATEGIES
MICHAEL PORTER
➢DIFFERENTIATION
➢Strong coordination among functions in R&D, product
development and marketing.
➢It designed to appeal to customers with special
sensitivity for a particular product attribute.
 GENERIC STRATEGIES
MICHAEL PORTER
➢DIFFERENTIATION
➢By stressing the attribute above other product qualities,
the firm attempts to build customer loyalty.
➢Often, such loyalty translates into the firm ability to
charge a premium price for its product: e.g. Cross-brand
pens, Brooks Brothers suits and Porsche automobiles.
 GENERIC STRATEGIES
MICHAEL PORTER
➢DIFFERENTIATION
➢Customers of a successfully differentiated firm can not
see largely identical products as being interchangeable
e.g. General Motors hopes that customers will accept
“only genuine GM replacement parts”.
 GENERIC STRATEGIES
MICHAEL PORTER
➢FOCUS: Whether linked to a low-cost base or a
differentiation base, attempts to attend to the
needs of a particular market segment.
➢Likely segments, are those that are ignored by
marketing appeals to easily accessible markets.
 GENERIC STRATEGIES
MICHAEL PORTER
➢FOCUS: A firm pursuing a focus strategy is willing
➢To serve isolated geographic areas
➢To satisfy the needs of customers with special financing,
inventory or serving problems
➢To tailor the product to the somewhat unique demands of
small to medium sized customer.
 GENERIC STRATEGIES
MICHAEL PORTER
➢FOCUS: The focusing firms profit from serving
their willingness to serve otherwise ignored or
under appreciated customer segments. e.g.
airlines in regional remote geographic areas.