Understanding Why Companies Use Porter's Generic Strategies: A Guide for 11-Year-Old Students

What Are Porter's Generic Strategies?

Porter's generic strategies are a way for companies to decide how to compete with other businesses. Michael Porter, a smart business thinker, came up with three main ideas (or strategies) that companies can use to be successful:

• Cost Leadership: Being the cheapest in the market.
• Differentiation: Offering something unique that others don't have.
• Focus: Targeting a small group of customers instead of everyone.

Why Would a Company Use These Strategies in a Report?

When a company writes a report, like a business plan or analysis, it might use Porter's strategies to:

1. Understand Their Own Strengths: The company can see whether it's best at being cheap, unique, or focused on a smaller market.
2. Compare With Competitors: By knowing which strategy other companies use, they can find ways to do better or different.
3. Plan for Success: The report can help decide what to do next to win more customers and make more money.
4. Explain to Others: A report sharing these strategies helps employees, managers, or investors understand how the company competes.

Example

Imagine a shoe company. They can:

• Make the cheapest shoes (cost leadership).
• Make very stylish or special shoes that no one else has (differentiation).
• Focus only on making running shoes for athletes (focus).

By choosing and explaining their strategy in a report, they can show how they will succeed in selling shoes.