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The Concept of Four Porter’s Generic Competitive Strategies

The four Porter’s Generic Competitive Strategies are some of the most common business approaches for a firm to compete within a specific industry. They allow to establish a competitive advantage, sustainable productivity, and profitability, which when combined could help a company succeed. The strategies consist of low-cost leadership, product differentiation, focus on a market niche, and strengthening the customer-supplier relationship. Information technology systems help to significantly implement these strategies, thus enabling a company to achieve a competitive advantage within the industry.

The low-cost leadership strategy consists of the production of goods and services at a lower price than competition while seeking to increase their quality. With sufficient planning and innovation, new products can be created that are cheaper to produce than older ones. Product differentiation is the concept of introducing new products which inherently changes the customer experience and convenience. This includes creating whole new sectors or product lines never seen on the market before. Differentiation can exist in marketing, brand, technology, or service. Focusing consists of developing a strategy which emphasizes a certain market niche or specialization for the company in its products or services. Although companies have a specific industry they area part of, focusing on a niche market allows to understand the consumer needs better, apply a competitive pricing strategy, and attract more customers with unique features. Finally, the strategy to strengthen customer and supplier intimacy seeks to provide more precise information and connect with the involved parties. Information systems play a critical role as they allow to collect, analyze, and present relevant data (shopping habits, shipping tracking, savings) to both the customer and supplier.

Although these strategies are evidently intertwined, companies usually focus on applying one of the approaches to their business model. Through a competent SWOT analysis and overview of market forces, a firm decides which aspects are most influential in driving its business and customer acquisition. However, this model is not flexible, and the recent rise of major information technology conglomerates such as Alibaba have shown that a company can apply several strategies simultaneously or quickly modify its business model in response to market demands.

As a company, Alibaba does not specifically produce any products. It offers the service of being one of the largest market platforms online and one of a kind in Asia. It presents product differentiation by creating methods which boost productivity and sales in China’s inefficient retail and logistics sectors. Furthermore, the company provides new services such as the online payment system utilized by Alibaba resources, which provides a secure method of transaction beneficial for customers and merchants alike. This has not existed on the online market before the company’s founding. Although an online marketplace is not exactly a niche market, Alibaba was able to capitalize on the absence of any major players in this field for Asian customers. All of its services, including a consumer-to-consumer portal and a comprehensive website for small manufacturers to obtain orders, were absent beforehand.

Finally, Alibaba seeks to establish a close relationship between consumers and suppliers. This is done through a significant amount of data that it has on customers, such as consumer habits and creditworthiness. For example, the company provides microloans to both small merchants and ordinary consumers alike. With time, Alibaba offers more products and services, using its online platforms and data to deliver services such as insurance policies. Furthermore, utilizing its expansive outreach and connections, the company is able to offer the Chinese customers products from global brands.