Hi, do anyone know how to answer this question using business strategy?
Porter’s ideas of cost leadership, differentiation and focus as distinct and separate generic strategies. Why does he argue that a firm which is stuck in the middle will be a below average performer?
Appreciate anyone who can advice.
Thanks
Any entity stuck in the middle, note stuck meaning reached a plateau, is on its way down. Natural forces of change state there are always people gunning for the top, but no one wants to be at the bottom. If you plateau and the best position you get to is the middle, then as others continue to strive for more, you will find yourself falling behind even those you have lead.
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December 13th, 2009 at 1:03 am
Any entity stuck in the middle, note stuck meaning reached a plateau, is on its way down. Natural forces of change state there are always people gunning for the top, but no one wants to be at the bottom. If you plateau and the best position you get to is the middle, then as others continue to strive for more, you will find yourself falling behind even those you have lead.
References :
December 13th, 2009 at 1:52 am
a firm stuck in the middle to start off is average definition wise… if they were first they would be excellent.
now, as to why Porter states that such a firm will be a below average performer is very simple…
when you try your best, and you can only get half way up,
your performance rating is average, because you wont stay exactly half way up forever, logically you will eventually drop a little at some point .. once u drop even .00001% point lower you are automatically below average….
hope that helps
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December 13th, 2009 at 2:18 am
Ending stuck in the middle may indicate that business objectives are not clear or defined enough.
You must identify whether you aim to have a broad scope with your products or shops or whether you would stay focused on a small niche. If you are pursuing one strategy, you cannot stay in the middle, right? So you are either following a focus or a broad strategy. The word scope means boundary, so it may be understandable that you lie somewhere in the middle if you are expanding. The thing to note is that you should not aim to remain there or happen to be there as a result of lack of strategy.
Likewise, on the low cost /differentiation strategy, you must decide how to operate. Having a low cost leadership strategy means you try to be as efficient as possible, lower cost and waste etc with the hope of having a competitively priced and attractive product. Being in this quadrant, means you may find it difficult or impossible to charge top prices for your products. On the otherhand, being in the differentiation strategy, your producst cost you a lot to produce and hence cannot sell them at a cheap price. There is nothing wrong going from one quadrant to another (in the Porter matrix) obviously passing through the middle in the mean time, but make sure you dont get stuck there.
The Korean car maker Hyundai, started as a cost leader but are trying to increase quality by benchmarking with Toyota. Although they are not following a differentiation benchmark company, they would end up facing higher costs and hence probably higher prices would be charged to customers.
Hope this helps… (I am working to launch a consultancy http://www.6times2.com). Pls visit in a month’s time if you have time.
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