Generic Business Strategy
Michael Porter introduced several generic strategies in his book Competitive Advantage: Creating and sustaining superior performances. The different generic strategies that Porter introduced functions to help organizations in maintaining a competitive advantage (Tanwar, 2013). Every generic strategy ought to be used by the individual organization to identify the direction in which the organization is heading. Each of the four strategies that Porter introduced, i.e. Cost leadership, Differentiation, Cost focus and Differentiation focuses are ideal for a different business type or business level. For a start-up organization or business, the most effective generic business strategy is the differentiation focus strategy. This strategy of doing business mostly favour small business start-ups and other low-capital organizations that need to grow when compared to different generic business strategies.
Differentiation focus as a generic business strategy is most suited for small scale businesses and start-ups. This is chiefly because, in this individual model, the company focuses on targeting a niche market that offers minimal competition and one that is focused (Tanwar, 2013). With this particular model, the business and its leadership ought to ensure that the product that is offered for sale is unique when compared to that of the competitor. The differentiation focus as a generic business strategy requires the organization to develop a robust brand loyalty amongst clients. The significant advantage that this business model offers to small organizations and start-ups is that it provides the business with a competitive advantage in a new market regardless of the investment capital that the company might put into the start-up. In the business environment, organizations that have a substantial amount of start-up capital often have the upper advantage when it comes to competition. Such organizations promote their products more efficiently and cover a wider part of the market with ease. For start-up organizations with limited investment capital, differentiation focus exists to solve this issue.
When compared to other generic business strategies that Porter introduced, the differentiation focus, as a generic business strategy is more advantageous to start-up organizations and other smaller businesses (Alstete, 2014). Organizations that make use of the cost leadership strategy most often strive to keep their cost to the minimum while ensuring that they consecutively have a broader market share while offering low or average prices. When compared to the differentiation focus strategy of competition, cost leadership requires that the business have a considerable investment capital at its disposal and efficient logistics. This factor is not the case with a lot of start-up organizations. On the other hand, the differentiation business strategy necessitates that an organization invest much in the development and research of its products in a bid to ensure adequate differentiation of the company’s products to its competitors. Conducting an intensive research and development program to a product is not ideal for start-up organizations as this is often capital intensive. The same concept applies to the cost focus strategy of doing business; thus, the only perfect strategy for maintaining a competitive advantage for a start-up is by using the differentiation focus business strategy.
Settling on the differentiation focus as a model of business strategy for a start-up organization has several impacts on the business plans. First and foremost, the business requires adjusting its plans to significantly focus on developing a business model that has a unique feature (Alstete, 2014). Most companies get into the business of trading in products that are not differentiated from other similar products in the market. For this individual start-up, the business shall require tuning its model and business plans so that they mainly focus on the differentiation of the products that the company is going to be engaged in.