In addition to the five forces model of industry competition, Michael Porter has developed a framework of so-called generic business strategies. Explain these generic strategies, describing their aims and application

What will be an ideal response?

The generic business strategies are based on the two types or sources of competitive advantage: low-cost and differentiation. The relationship of these two sources with the scope of the target market served (narrow or broad) or product mix width (narrow or wide) yields four generic strategies: cost leadership, product differentiation, cost focus, and focused differentiation. Cost leadership is competitive advantage based on a firm's position as the industry's low producer in broadly defined markets or across a wide mix of products. By contrast, strategies to achieve a narrow focus advantage target a narrowly defined market or customer. This advantage is based on an ability to create more customer value for a narrowly targeted segment and results from a better understanding of customer needs and wants. Focused differentiation strategies backed by a strong export effort have proven to be very successful. When a firm's lower cost position enables it to offer a narrow target market and lower prices than the competition is what is referred to as the strategy of cost focus. In the shipbuilding industry, for example, Polish and Chinese shipyards offer simple, standard vessel types at low prices that reflect low production costs.