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Porters 3 Generic Strategies

An organizations positioning status within its industry defines whether that firm is an established, well

profitable, and lies above or below the industry margin. The stipulated base of above marginal

profitability in the long run is stated as Sustainable in this Competitive Advantage. There are two

mechanisms where the firm can gain this advantage: Low cost or differentiation. These two types decideand carry out organizational activities in order to achieve the firms goal in the long run. This leads to

three generic strategies for achieving the above marginal competency in an industry: Cost Leadership,

Differentiation and Focus. The Cost focus strategy has two sub variables called cost focus and

differentiation focus.

Cost Leadership

It involves being the leader in terms of cost in the industryor market. But the important point is that

its not accepted to be the lowest cost producer since the rivals wi ll be competing against others and

they may take the opportunities to challenge in reducing prices, which is not difficult to proceed with. It

wont be a good strategy to heighten up the market shares.

Companies that are successful in achieving Cost Leadership usually have:

Capital Gain Accessibility ; in order to invest them in technological areas which will decrease the

fundamental costs down in the long run

Very efficient logistics.

A low-cost resource base (labor, materials, facilities), and a mechanism to decrease the costs in

the long term than the rivals.

Differentiation

Differentiation involves making the products or services different from and more attractive those of

other competitors. This is a mechanism where the firm has to be compatible enough with the upcoming

technology and changes of the business environment. There should be a capacity to change the nature

or size of the product/service when it counts with features, functions, sales & marketing, customer

service and all those areas coves up the value chain of the business.

To make a success of a Differentiation strategy, organizations need:

Good research & development and space for innovation.

The ability to deliver high-quality products or services.

Effective sales and marketing strategies, where the market could identify the differentiatedproduct or service and their advantages.

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Differentiation Focus

Focus strategy itself a bit complex mechanism to follow up with since the firm has to be in a position

where it can gain sensitive business information of its rivals; niche market competitors. The underlying

forces of such market and the user base and its needs and wants, behavioral patterns need to be

identified clearly. The firm has to take care of the costing as well to develop such low-cost & wellspecialized product/ service to the market. Because the users of this market are highly sensible toward

the changes of the products/costs. Therefore the loyalty of the customers has to be gained carefully and

strategies have to be implemented to retain them with the firm for the long run.

Application of Porters 3 Generic strategies to Esoft

Figure 1Portors Generic Staretgies

Competitive Advantage

Lower Cost Differentiation

Broad

Target

Narrow

Target

Source: Authors Work

Differentiation

Esoft itself is an IT back grounded company and specialized in Software/ICT Industry.

The Brand image (sales & Marketing) determines the IT scope, and has a greater influence on grabbing

the attention of youth.

Business management field is a fast pacing field; it has become a must to gain the knowledge in this

area for anyone who is interested in running an organization.

Cost Leadership Differentiation

School of Business

School of Computing

Cost Focus

Language Academy

Differentiation Focus

School of Engineering & Technology

School of Hospitality Management

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Esoft has invested to deal with the London Metropolitan University to establish a good educational

background to the students and the quality has to be maintained by developing the business units as per

the university requirements.

Business Management and ICT fields have to be preserved with regular updates and specialization since

there are few rivals who are straightly in to one specific industry.

EG: Business ManagementNIBM,NSBM,BMS

ICTSLIIT,IBM

Differentiation Focus

The Hospitality Management and Engineering fields are the upcoming and trending business units in the

market. There is a trend in Sri Lanka that those want to specialize in hospitality management go on

abroad to enroll in foreign programs and gain the exposure while working in those hotels. These

consumers are highly sensible towards the cost they offered in learning hospitality management. So the

required areas have to be implemented and for Esoft its a novel business experience as the business

unit is still in the startup level.

In engineering field also The Sri Lankan Governmental universities offer good quality degree

programmes to the students. Eg: Moratuwa, Colombo, Peradeniya & Ruhuna Universities. In order to

compete with the courses Esoft should be highly armed with overall the learning criteria. In order to

compete with the local campuses Esoft has to invest and widen u their consumer level by specializing in

sensible areas.

Cost Focus

The Language academy is newly segmented business unit and its for those who like to widen up their

English language skills. There are more competitors in the industry for this market segment and for Esoft

its not important to grab the market share in such area as its not a specialized learning unit to invest

further more. This is a service oriented business unit which is not accelerating in making up profits.

Reference

Mind Tools Ltd. (2014) Portors Generic Stategies- Choosing Your Route to Success (online) Availableat

http://www.ifm.eng.cam.ac.uk/research/dstools/porters-generic-competitive-strategies/ Accessed on

18thDecember 2014

http://www.ifm.eng.cam.ac.uk/research/dstools/porters-generic-competitive-strategies/http://www.ifm.eng.cam.ac.uk/research/dstools/porters-generic-competitive-strategies/http://www.ifm.eng.cam.ac.uk/research/dstools/porters-generic-competitive-strategies/