Business Management Toolkit: Porter's Generic Strategies (DP IB Business Management): Revision Note

Porter's generic strategies

1. Cost leadership

• ABC’s core concrete business is best suited to a cost leadership strategy

  • Concrete is largely a standardised product

  • Competition is price-sensitive and often local

  • Large-scale production creates economies of scale

How can ABC pursue cost leadership?

• Improve factory efficiency to lower unit costs

• Invest in energy-saving production

• Secure long-term supply contracts for raw materials

Evaluation of cost leadership

2. Differentiation

• ABC could differentiate its concrete by focusing on sustainability

How can ABC pursue differentiation?

• Low-carbon concrete products

• Concrete using recycled aggregates

• Strong CSR positioning

Evaluation of differentiation

3. Differentiation focus

• ABC’s e-waste processing fits best with a differentiation focus strategy

  • It operates in a specialised recycling market

  • Its room-temperature metal recovery process is unique

How ABC could pursue differentiation focus

• Promote its low-energy, environmentally friendly process

• Target environmentally conscious firms

• Position itself as an advanced circular economy provider

Evaluation of differentiation focus

Risk of being “stuck in the middle”

• If ABC

  • Tries to be the cheapest concrete producer

  • While also heavily investing in expensive green differentiation

  • Without clear strategic focus

• It may

  • Increase costs without clear pricing power

  • Confuse customers

  • Reduce overall competitiveness

• ABC must clearly decide

  • Cost leader in concrete?

  • Differentiator in sustainable materials?

  • Specialist recycler in niche e-waste?

• Trying to combine all strategies equally could weaken performance.

Evaluation of Porter’s model for Abraca (ABC)

Strengths

• Provides clear strategic direction

• Helps ABC decide where to focus resources

• Highlights importance of competitive advantage

Limitations

• Does not consider external factors (e.g. regulation, gold prices)

• Difficult to apply neatly when a firm operates in multiple industries

• Sustainability pressures may require combining cost and differentiation