Runninghead:Chapter6.1DiscussionQuestion
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Chapter6.1DiscussionQuestion
Student’s Name:
InstitutionalAffiliation
Chapter6.1Discussion Question
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Drawbacksandriskstoabroadgenericbusinessstrategy
ThebroadgenericbusinessstrategiesconsistofDifferentiationstrategyandCost-Leadership
strategy. The differentiation strategy involves the creation of higher values of products for a
business’customers than the products of a rival business and thereby charging higher prices
(Rothaermel, 2017). For example, Tesla produces environmental-friendly electric vehicles for
which it pins a high selling price. The risk associated with this strategy is that the tastes and
preference of consumers may change to the disfavor of the product being offered, in this case
being an electric car. The drawback associated with this strategy is that the business’rivals may
find a way to match the value of the product being offered thereby doing the business to lose its
competitive edge. For example, other car manufacturers such as GM have started to venture into
the manufacture of electric vehicles.
Cost Leadership is a strategy in which a business charges competitively low prices for its
products which are similar to a competitor’s product in the market thus offering its customers
valueformoney(Rothaermel,2017).Theriskinthisstrategyisthatcompetitorscanjustaswell lower the
prices for their products thereby curtailing the business’s competitive advantage and reducing the
overall profit of the product in the market.With advancements in technology, rival firms may have
the ability to increase their production capacity, surpassing pass the business’ production capacity
thus wiping out its competitive advantage.
Drawbacksandriskstoafocusedbusiness strategy
Focused Business Strategies are the same as broad generic business strategies with the
exception that their scope of the competition is narrower (Rothaermel, 2017). The drawbacks
associatedwiththesestrategiesisthatsincetheybusinesshasalreadyspecializedintargetinga
specificmarketniche,exploringothersimilarmarketsrequiresanewsetofskills,acostwhich
Chapter6.1Discussion Question
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maybeexpensivetoincur(Gaille,2018).Thereisalsotheriskthatconsumersmaylosetheir taste and
preference of the products being offered by the business, therefore, costing it huge losses. The
niche that the company has specialized in could also be taken over by a larger competitor.
Chapter6.1Discussion Question
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References
Rothaermel,F.T.(2017).Strategicmanagementconcepts(Custom3rded.)NewYork,NY:
McGraw-Hill.
Tanwer,R.(2013).Porter’sGenericCompetitiveStrategies.IOSRJournalofBusinessand Management
(IOSR-JBM). 15(1) 11-17. Retrieved from: https://sswm.info/sites/default/files/reference
attachments/TANWAR%202013%20Porter’s%20Generic% 20
Competitive%20Strategies.pdf
