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Porter Generic Strategy Case Study

Nike Inc.’s generic strategy for competitive advantage emphasizes product mix diversity. A generic strategy, according to Michael Porter, defines how a business achieves and maintains its competitiveness. On the other hand, Nike’s intensive growth strategy reflects the company’s focus on innovation to develop the business. An intensive strategy shows how a company grows. Founded in 1964, Nike Inc. has grown to become one of the biggest players in the global athletic shoes, apparel and equipment market. To keep its position and competitive advantage, Nike must ensure that its generic strategy and intensive growth strategies are always suited to current business conditions.

Nike Inc.’s generic strategy (based on Michael Porter’s model) is appropriate for its diverse product lines, ensuring competitive advantage. The corresponding intensive strategies grow Nike’s global sports shoes, apparel and equipment business.

Nike’s Generic Strategy (Porter’s Model)

Nike Inc. uses a combination strategy for its competitive advantage. This type of strategy includes two or more of the generic strategies from Porter’s model. The following are the generic competitive strategies implemented in Nike’s combination strategy:

  1. Cost Leadership Strategy
  2. Differentiation Strategy

Nike’s cost leadership generic strategy sustains competitive advantage based on costs. In this generic strategy, the company minimizes production costs to maximize profitability or reduce selling prices. In the late 1990s, Nike reduced costs and the selling prices of its athletic shoes and other products. This generic competitive strategy helped the company regain its competitiveness, especially against Adidas. Also, Nike’s differentiation generic strategy provides unique products. For example, the company integrates cutting-edge designs for its shoes. The combined cost leadership and differentiation generic strategies boost Nike’s performance in the global industry. A strategic objective based on the cost leadership generic strategy is to grow the company’s competitive advantage through new technologies to reduce production costs. A financial objective based on the differentiation generic strategy is to maximize Nike’s profit margins, such as on new sports shoes.

Nike’s Intensive Strategies (Intensive Growth Strategies)

Product Development. Nike’s primary intensive growth strategy is product development. This intensive strategy involves the introduction of new products to grow sales revenues. For example, Nike’s mission statement highlights innovation applied through new designs for shoes and related products. New technologies enhance the products and set them apart from the competition. In product development, these products remain attractive despite changing consumer preferences. Thus, this intensive strategy supports Nike’s differentiation generic competitive strategy via product innovation. A suitable strategic financial objective based on this intensive growth strategy is to increase Nike’s market share through cutting-edge technologies integrated in the design of sports shoes, apparel and equipment.

Market Penetration. Nike’s secondary intensive growth strategy is market penetration. In this strategy, the company grows by increasing sales revenues in existing markets. For example, Nike increases its stores and retailers in the United States to sell more athletic shoes to American consumers. However, market penetration is just a secondary intensive growth strategy because the company already has significant presence in the global market. The cost leadership generic competitive strategy empowers Nike to penetrate markets based on product affordability. A strategic objective linked to market penetration is to increase Nike’s market presence by increasing the number of authorized retailers. In addition, a financial objective related to this intensive growth strategy is to increase Nike’s sales revenues through more sales to sports enthusiasts in current markets.

Market Development. One of Nike’s supporting intensive growth strategies is market development. This strategy facilitates the company’s growth by targeting new markets or market segments. For example, Nike enters new markets in Africa and the Middle East to increase its shoe sales revenues. Alongside product development, the company applies the market development intensive growth strategy by investing in new technologies to penetrate new market segments, such as segments composed of bodybuilders. However, the saturation of Nike stores and retailers around the world means that this intensive strategy has only a supporting role in the company’s growth. The generic competitive strategy of differentiation helps the company enter new markets, based on product attractiveness. A strategic financial objective under this intensive growth strategy is to increase Nike’s profitability by entering new markets in Africa and the Middle East.

Diversification. Diversification is the least significant in Nike’s intensive strategies for growth. This strategy involves developing new businesses to achieve growth. Nike implemented this intensive strategy in its early years, such as when it introduced apparel and sports equipment to its product mix. Initially, the Nike brand was on athletic shoes only. Diversification can support Nike’s generic competitive strategy of differentiation through new businesses that supply materials for product innovation in the athletic shoes, apparel and equipment business. A strategic financial objective based on this intensive growth strategy is to improve Nike’s financial risk by entering other industries.

References
  • About Nike – The official corporate website for Nike, Inc. and its affiliate brands.
  • Dess, G. G., & Davis, P. S. (1984). Porter’s (1980) generic strategies as determinants of strategic group membership and organizational performance. Academy of Management Journal27(3), 467-488.
  • Glazer, R. (1999). Competitive Advantage Through Information-Intensive Strategies. Handbook of Services Marketing and Management, 409.
  • Merchant, H. (2014). Configurations of governance structure, generic strategy, and firm size. Global Strategy Journal4(4), 292-309.
  • Miller, D. (1992). The generic strategy trap. Journal of Business Strategy13(1), 37-41.
  • Nike, Inc. Form 10-K, 2015.
  • Parnell, J. A. (1997). New evidence in the generic strategy and business performance debate: A research note. British Journal of Management8(2), 175-181.
  • Varadarajan, P., & Dillon, W. R. (1982). Intensive growth strategies: A closer examination. Journal of Business Research10(4), 503-522.

Apparel Industry, Case Study & Case Analysis, Generic Strategy (Porter's Model) & Intensive Growth Strategies, Nike Inc., Retail, Retail Industry, Strategy

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General Motors Company (GM) has a generic strategy (Porter’s model) that ensures competitive advantage amid increasing competition in the global automotive industry. Michael Porter’s model indicates that competitive advantage is created through a generic strategy that the company effectively applies in relation to variables in the target market. In this case, General Motors’ generic competitive strategy emphasizes the benefits of economies of scale, which is one of the company’s strengths (Read: SWOT Analysis of General Motors Company). The firm also employs intensive growth strategies based on the business effects of such generic strategy. Each intensive strategy contributes to the growth of General Motors. However, these intensive growth strategies have different degrees of significance in the business. For example, General Motors benefits more from one intensive strategy compared to the other intensive strategies in terms of their effects on organizational growth and appropriateness to the target market for automobiles and related products.

The effectiveness of General Motors’ generic strategy has a direct link to the organization’s ability to address issues associated with competitive rivalry. Competition is a major external force that affects the company’s growth and development. The Porter’s Five Forces Analysis of General Motors Company shows the significance of competition in determining the performance of the automobile business. Thus, the generic competitive strategy must match the needs of the organization, while considering the external business environment. On the other hand, the effectiveness of General Motors’ intensive growth strategies influences how the business grows. The competitive advantage based on the generic strategy and the growth potential based on the intensive strategies contribute to the long-term success of General Motors.

General Motors Company’s Generic Strategy (Porter’s Model)

General Motors’ generic competitive strategy is cost leadership. Based on Porter’s model, this generic strategy creates competitive advantage based on the attractiveness of low costs and corresponding low prices of products. For example, General Motors’ automobiles are offered at prices that are lower than premium or luxury automobiles like Mercedes-Benz. The relatively lower prices attract customers, leading to GM’s competitive advantage. A strategic objective based on this generic strategy is to enhance manufacturing process efficiencies through automation and continuous improvement to support General Motors’ competitive advantage.

The differentiation generic strategy has a supporting role for General Motors’ competitive advantage. However, cost-leadership remains the company’s main generic competitive strategy. In differentiation, the strategic objective is to make products attractive on the basis of features, brand image, quality, and related variables. For example, the differentiation generic competitive strategy is applied through General Motors’ research and development efforts toward producing energy-efficient automobiles. The features of these products should also differentiate them from the competition, to ensure the company’s competitive advantage. This generic strategy supports the technological advancement and value emphases in General Motors’ mission statement and vision statement, respectively.

General Motors Company’s Intensive Strategies (Intensive Growth Strategies)

Market Penetration (Primary). General Motors uses market penetration as its primary intensive growth strategy. This intensive strategy contributes to the company’s growth by increasing sales in current markets. For example, General Motors expands its market reach by increasing the number of its dealerships. In this way, the distribution of GM automobiles increases, improving customers’ access to these products. General Motors’ cost-leadership generic strategy creates competitive advantage that facilitates the successful implementation of market penetration. Based on this intensive growth strategy, a strategic objective is to continue expanding the company’s distribution network to support business growth and development.

Product Development (Secondary). Product development serves as a secondary intensive growth strategy in the case of General Motors Company. This intensive strategy ensures growth through new product sales. For example, every new product or product line translates to a potential increase in GM’s revenues. This intensive growth strategy supports the differentiation generic competitive strategy by focusing on uniqueness in the design and features of new products. Thus, General Motors’ strategic objective based on product development is to achieve a high rate of innovation in new product development.

Market Development (Supporting). General Motors employs market development as a supporting intensive strategy for growth. In this intensive strategy, the company grows by entering new markets or market segments. For example, General Motors’ growth as a global automotive business has been significantly based on new market entry, such as when the company adds a country to its areas of operations and sales. However, considering the firm’s current worldwide operations, this intensive growth strategy now only serves a supporting role in business growth. Based on market development, a strategic objective is to enter new markets in Africa or develop novel products to enter new market segments for General Motors’ growth. The differentiation generic strategy can contribute competitive advantage needed to maximize the benefit of implementing the market development intensive growth strategy.

Diversification (Supporting). Diversification is another intensive strategy that has a supporting role in General Motors’ growth. The company has a low probability of using this strategy. Diversification supports business growth through new business. For example, General Motors could acquire a car rental services company in a domestic market to fuel business growth. This intensive growth strategy can contribute new business capabilities to support the differentiation generic competitive strategy. A strategic objective linked to this intensive strategy is to grow General Motors through new acquisitions of businesses outside the automotive industry.

References
  • Dess, G. G., & Davis, P. S. (1984). Porter’s (1980) generic strategies as determinants of strategic group membership and organizational performance. Academy of Management Journal27(3), 467-488.
  • General Motors Company – Corporate Strategy.
  • General Motors Company, Form 10-K.
  • Glazer, R. (1999). Competitive Advantage Through Information-Intensive Strategies. Handbook of Services Marketing and Management, 409.
  • Merchant, H. (2014). Configurations of governance structure, generic strategy, and firm size. Global Strategy Journal4(4), 292-309.
  • Parnell, J. A. (1997). New evidence in the generic strategy and business performance debate: A research note. British Journal of Management8(2), 175-181.
  • Spry, A., & Lukas, B. A. (2016). Brand Portfolio Architecture and Firm Performance: The Moderating Impact of Generic Strategy. In Looking Forward, Looking Back: Drawing on the Past to Shape the Future of Marketing (pp. 866-867). Springer International Publishing.
  • Varadarajan, P., & Dillon, W. R. (1982). Intensive growth strategies: A closer examination. Journal of Business Research10(4), 503-522.

Automobile Industry, Automotive Industry, Case Study & Case Analysis, General Motors Company (GM), Generic Strategy (Porter's Model) & Intensive Growth Strategies, Strategy

COPYRIGHT NOTICE:
This article may not be reproduced, distributed, or mirrored without written permission from Panmore Institute and its author/s. Copyright by Panmore Institute - All rights reserved. Small parts of this article may be quoted or paraphrased for research purposes, as long as the article is properly cited and referenced together with its URL/link.