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Generic Strategy Model
The Porter generic strategy model examines two major marketing planning concepts and the alternatives available with each: competitive scope (broad target or narrow target) and competitive advantage (lower cost or differentiation). By combining the two concepts, the Porter model identifies these basic strategies: cost leadership, differentiation, and focus.

With a cost leadership strategy, the firm appeals to a broad market and manufactures products in large quantities. Through mass production, the company is able to minimize per-unit costs and offer low prices. This allows the firm to have better profit margins than competitors, respond better to cost increases, and attract price-conscious consumers.

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With a differentiation strategy, the firm aims at a large market by offering a product viewed as quite distinctive. The company makes a product that has a broad appeal, yet is perceived by consumers as unique by virtue of its design, features, availability, reliability, etc. As a result, price is not important; and consumers become quite brand loyal.

With a focus strategy, a company seeks a narrow target segment through low prices or a unique offering. It is able to control costs by concentrating efforts on a few key products aimed at specific consumers, or build a specialized reputation and serve a market that may be unsatisfied by competitors.

According to the Porter model, the relationship between market share and profitability is U-shaped. A firm with a low market share can succeed by developing a well-focused strategy. A firm with a high market share can succeed through cost leadership or a differentiated strategy. However, a company can become "stuck in the middle" if it has neither a strong and unique offering nor cost leadership.

Source of Reference:
Arthur Thompson and Strickland, Strategic Management: Concepts and Cases, McGraw Hill. You can obtain this excellent book here

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