Rarely, companies can offer low prices and unique features that customers consider desirable. A cost leadership strategy works if the company can produce its products at the lowest cost in the industry. This strategy is commonly used in markets with products that are not clearly different from each other. They are standard products in a wide market, purchased frequently and universally accepted by most consumers.
Walmart is one of the best-known companies with an effective cost leadership strategy. . A differentiation strategy requires the company to offer products with unique features that consumers consider valuable and are willing to pay more for them. If consumers perceive these unique properties to be worthwhile, the company may charge higher prices for its products.
Having a unique product is not the end of the story. Implementing a differentiation strategy requires a sales team that has the necessary skills to effectively communicate the unique properties of products and convince consumers that they are getting more value for their money. At the same time, marketing campaigns must promote and establish the company as a renowned company known for its innovative and high-quality products. A differentiation strategy involves several risks.
Competitors won't stand idly by when they lose market share; they'll find ways to imitate products and start their own differentiation campaigns. Companies that follow a cost-focused strategy are taking risks by leaving the mass market. While focusing on a specific demographic can generate a loyal customer base, the company bases its fortunes on a small group of buyers. Features that are attractive to this niche market may not be attractive to the overall market.
Like a cost-focused strategy, the differentiation approach targets a narrow market niche. In this case, the company finds unique features in its products that appeal to a particular group of customers. A successful differentiation strategy depends on developing strong brand loyalty from your customers and on constantly finding unique features to stay ahead of the competition. In Michael Porter's generic strategies, three main strategies are used as a basis, namely, cost leadership, differentiation leadership and focus.
Later, he divided the focus strategy into two subcategories, namely, cost approach and differentiation approach. Under the cost leadership strategy, the organization targets a large, large-scale market. They offer the lowest possible prices to attract customers. The intention of this strategy is to reduce costs as much as possible.
The organization can use two methods to achieve success using a cost leadership strategy. They can reduce the cost of the product as low as possible, or they can reach a large market and keep prices at an average level. Both options will help the organization reduce cost and increase revenue. According to the differentiation strategy, the organization targets a wide and wide range of markets, but offers a product with unique characteristics.
The organization must create the product in a unique way in which the product can achieve a competitive advantage in the industry. They should focus on attracting customers through the unique features of the product and thus increasing market share. This helps the organization to face rivalry competition successfully and maximize profits. However, organizations that use the differentiation strategy in Michael Porter's generic strategies have to invest heavily in research and development techniques, innovation and creativity.
When the organization implements the cost approach strategy, it targets a niche market with a bit of competition. This is more of a focused market segment and the product will be supplied to the market at the lowest possible price. It is important for the organization to correctly choose the market niche and provide for the market. This will generate repeat customers and the cost of the products will remain low.
When an organization supplies its product to the market using the differentiation approach, it selects a market niche and provides a unique product to that market. This involves powerful customer brand loyalty to the product. It is very important to ensure that the features of the product remain unique, since customer loyalty is based on the uniqueness of the product. You are adopting new products or services that have no technological or commercial relationship with current products, equipment or distribution channels, but that may attract new customer groups.
The main reason behind this type of diversification is the high return on investments in the new industry. It is often used by large companies looking for ways to balance their cyclical portfolio with their non-cyclical portfolio. A successful international strategy focuses on a single point of operation while exporting products and services around the world. As such, it ranks low both in global integration and in local response capacity.
An international strategy is usually the first strategy used by companies when they expand to secondary markets, and that's because it's the most accessible of the four. Basically, it is an extension of its national strategy, since it operates with a central or central office in its domestic market and exports its products to target markets. If you're not sure how your products will respond to different markets or you just want to try them out, following the export model is a safe option. However, an international strategy has its drawbacks, so many companies use an international strategy to get started before moving on to one of the other three strategies.
Regardless of these challenges, an international strategy is by far the most popular for companies, especially when they take their first steps towards globalization and international expansion to different countries. However, the greatest challenge of the global strategy is to know what degree of standardization should be pursued. Even major global brands continue to invest in a certain level of localization and adaptation to local markets, but not so much as to infringe on their scale and efficiency. You should expect to invest in a solid localization process so that your customers can interact with your website, mobile application, packaging, and more in their native language.
While a global strategy may seem like the end of the game, for many brands, the best option is a transnational strategy, which divides the difference in terms of local responsiveness and global integration. Market penetration is considered a low-risk strategy. A company that uses market penetration will attempt to expand the sales volume of its current products in its established markets to increase its total market share. Often confused with market development, market penetration promotes brand loyalty and customer retention by using marketing material to attract customers using existing products or services.
You can do this through price reductions or packages, for example, that take customers away from the competition or create higher quality creative content that generates more quality leads. Or, you can explore ways to target existing customers and audiences through new products and services. Market development is a high-risk strategy that can bring significant benefits. You should only consider this strategy when you already have sufficient capital and resources to do so.
Unlike market penetration, market development consists of expanding or reorienting. This could mean taking an existing product to a new audience or market, or even modifying your product to turn it into something new and focusing on new customers entirely. To create a market development strategy, you must conduct thorough market research to identify market segments: small groups of people in a larger population grouped by labels. You can create these segments around identifiers such as location, age, income, or industry.
Once you've selected your ideal market segment, you should create a marketing and branding strategy that advertises your existing product or service to attract a new type of customer. Try to attract new customers and markets by finding other uses for a current product or adding new features and benefits. Within SaaS, market development has become a collaborative effort between product and marketing teams. Internal alignment is essential for this strategy to work, since every new product or service must be brand-based and in line with messaging objectives.
Product development is a strategic approach to growth that focuses on creating and marketing new products. It's not about expanding your customer base by targeting new markets. Instead, it's about improving your product line to attract more customers in your current market segment. Imagine a dessert restaurant that only serves ice cream.
Expanding your menu to include waffles could increase the buying rates of existing customers in your business. To determine new products, you must conduct extensive consumer research, focusing on demands and competitive analysis. Product development requires strong cross-functional collaboration between teams to succeed. Diversification is the riskiest of the four growth options.
This strategy involves introducing a new product to a completely new market, where you can have minimal experience. This could include deploying products to new geographical areas and transmitting the benefits of their products to the local population. Without the support of growth marketing experts, failure is a clear possibility, although the potential to make big profits may be worth the risk. Implementing a diversification strategy in a sector that is facing an extreme financial recession or where a company loses significant market share in a central part of its business can help avoid further damage or closures.
When markets are challenging and competition is fierce, many companies choose to protect their core business while exploring new possibilities. A multi-home strategy is prominent in terms of local responsiveness and downward in global integration, making it the “local first” approach to all four strategies. To identify opportunities for growth, Michael Porter's generic strategies can be used in any type of organization. There are several different growth marketing strategies you can use to increase your market share.
Using the Ansoff matrix to guide the planning process can help identify new marketing opportunities and, at the same time, remind you of the potential risks and dangers that new strategies may entail, especially when they are poorly implemented. Maintaining all this, the organization's portfolio must also grow and strategies must be implemented using available strengths and opportunities. In 1985, through his book “Competitive Advantage Creating a Sustaining Superior Performance”, Michael Porter's generic strategies were presented for the first time. Michael Porter's generic strategies are a tool that can be used to identify the direction of the organization.
These forms are clearly presented in the Ansoff model, a strategic tool used during the development of a growth strategy. SWOT and Five Forces analyses will help identify which of these generic business strategies will work best for your company. Michael Porter, a professor at Harvard Business School, wrote several well-known books on competitive strategies for companies. .