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Porters Generic



2. Porter Generic Strategy - FMCG Team Member: Sureshkumar Maurya MMM 11 Jayshree Naik - MMM 14 Maheshkumar Singh - MMM 23 Nikhil Mali - MMM Himmat Gupta - MMM 3. Top 10 FMCG Companies in World (2013) Rank Company Market Value ($ in Billions) 1 Nestle 233.5 2 Procter and Gamble 208.5 3 Coco-Cola 173.1 4 Anheuser-Busch InBev 153.5 163.2 5 Philips Morris International 150.6 6 Unilever 122.3 7 Pepsico 118.9 8 British American Tobacco 102 9 Reckitt Benckiser Group 51.2 10 General Mill 29.9 4. Top 10 FMCG companies in INDIA (2013) Rank Company Market Value ($ in Crores) 1 ITC Ltd. 256,769 2 HUL 127,144 3 Nestle India 49,768 4 Godrej Consumer Products India 28,107 5 Dabur India Ltd 26,272 6 GlaxoSmithKline Consumer Healthcare 23,435 7 Colgate Palmolive 18,329 8 Marico Ltd 13,137 9 Emami 10,788 10 Procter and Gamble 9,555 5. Introduction Michael Porter is a professor at Harward Business School. A firms success in strategy rests upon how it positions itself in respect to its environment. Michael Porter has argued that a firm's strengths ultimately fall into one of two headings: cost advantage and differentiation. By applying these strengths in either a broad or narrow scope, generic strategies result:, Cost leadership Differentiation, and Focus (Cost Focus and Differentiation Focus) 6. Cost Leadership Superior profits through lower costs. E.g. : Wal-Mart, Micromax phone Differentiation Creating a product or service that is perceived as being unique throughout the industry E.g. : Mcdonald, Nokia, Samsung Focus Concentrating on a limited part of the market. Cost Focus Differentiation Focus E.g. : PepsiCo, Apple I-phone, Vertu Generic Strategies 7. Target Scope Advantage (Low Cost) Advantage (Product Uniqueness) Broad Cost Leadership Differentiation Narrow Focus Strategy (Cost Focus) Focus Strategy (Differentiation) Porters Generic Strategy 8. Porter Generic Strategy 9. Cost Leadership Strategy Aiming to become Lowest Cost Producer The firm can compete on the price with every other industries and earn higher unit profits. Cost reduction provides the focus of the organisations strategy. Targets a broad market. Competitive advantage is achieved by driving down costs. A successful cost leadership strategy requires that the firm is the cost leader and is unchallenged in this position. Especially beneficial : where customers are price sensitive 10. Type : Public Industry : Beverage Founded : 1886 Founder(s) : Asa Griggs Candler Headquarters : Coca-Cola headquarters, Atlanta, Georgia, U.S. Number of locations : +200 Area served : Worldwide Employees : Approx. 2.1 million (2011) Fla : Cola, Cola Cherry, Cola Vanilla, Cola Green Tea, Cola Lemon, Cola Lemon Lime, Cola Lime, Cola Orange and Cola Raspberry. 11. Brand 12. Focusing on cost leadership through disciplined working capital management and tight operating expenses control. Optimization of the production and distribution infrastructure Personal cost ownership throughout the organization Logistic excellence Daily Average serving from 9 peoples (1886) to 1.8 million people now. Ensure the strongest and most efficient production, distribution, and marketing systems possible The established Coca-Cola HBC Business Services Organization (BSO) that standardizes, centralizes, coordinates and simplifies certain Finance and Human Resources processes to improve productivity and provide important transactional services at a lower cost 13. Access to the capital required to make a significant investment in production assets. Design skills for efficient manufacturing High level of expertise in manufacturing process engineering. Efficient distribution channels. Success Mantra 14. Risks Involved.. Other firms may be able to lower their costs as well. As technology improves, the competition may be able to leapfrog the production capabilities, thus eliminating the competitive advantage. It could lead to a damaging price wars. There might be difficulty in sustaining cost leadership in the long run. A firm following a focus strategy might be able to achieve even lower cost within their segment. 15. Differentiation Strategy A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers. Customers perceive the product to be different and better than that of rivals. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. Differentiation can be based on product image or durability,after-sales,quality,additional features. It requires flair,research capability and strong marketing. 16. Uniqueness Buyers ValueDifferentiation 17. McDonalds 18. Type : Public Industry : Restaurants Founded : McDonalds Corporation Founder(s) : Richard and Maurice McDonald,( McDonalds restaurant concept ) Ray Kroc,( McDonalds Corporation founder ) JV in India : Vikram Bakshi & Amit Jatia Headquarters : Oak Brook,Illinois,US Area served : Worldwide Key people : James A. Skinner (Chairman & CEO) 19. Number of Restaurants : +33,000 in 118 countries Customers : appr. 67 million / day Products : Fast Food ( hamburgers , chicken , french fries , soft drinks , coffee , milkshakes , salads, desserts , breakfast ) McDonald's customers are of all classes, but largely working, and people of all ages. McDonalds strove to meet a customer wait time at no more than one minute in line and 30 seconds at the counter. 20. McDonald's understood that the parent was making the purchasing decision, most likely based solely on price. What McDonald's marketing executives did was ingenious. They put a toy in with the hamburger, french fries, and Coke. Then they gave it a special name, calling it a Happy Meal. Then they marketed it to the kids. McDonald's knows that some customers go to its stores to take a quick break from their day's activities and not because McDonald's was able to make their food ten seconds faster than a competitor. So McDonald's marketing executives then put together the phrase, Have you had your break today? They've taken competing on price right out of the picture, says Greshes. They bring you quality, convenience, service, and value and they make you feel like you are getting a break in your hectic day. 21. Success Mantra Access to leading scientific research. Highly skilled and creative product development team. Strong sales team with the ability to successfully communicate the perceived strengths of the product. Corporate reputation for quality and innovation. 22. Risks Involved Involves higher costs. Customers might become price sensitive and choose on price rather than uniqueness. Customers may no longer need the differentiation factor. Imitation by competitors and changes in customer tastes. Rivals pursuing a focus strategy may be able to achieve even greater differentiation in their market segments. 23. Focus Strategy The focus strategy concentrates on a narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. The premise is that the needs of the group can be better serviced by focusing entirely on it. A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly. Because of their narrow market focus, firms pursuing a focus strategy have lower volumes and therefore less bargaining power with their suppliers However, firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitute products do not exist. 24. Type : Private Industry : Animal food manufacturing Founded : North Carolina,U.S.(1986) Founder(s) : Frank C. Mars Headquarters : 6885 Elm Street, McLean, Virginia, US Area served : Worldwide Key people : Steven Badger(Chairman) Paul S. Michaels (President and CEO) Employees : Divisions : Subsidiaries : Wrigley Jr. Company Reckitt Benckiser 25. The company makes the market leaders Pedigree (dog food) and Whiskas (cat food), as well as kitekat (cat food) and Pal (dog food). By successfully adopting the 'focus' strategy since 1950, Mars Inc. has emerged as the largest consumer animal food company. The leading exporters of pet food for 2004 were France ($993 million), United States ($786 million) and the Netherlands ($511 million),[6] while the leading importers were Japan ($718 million), Germany ($617 million) and the UK ($563 million).. Top Brand are Cesar, Greenies, Nutro, Pedigree, Royal Canin, Sheba, Whiskas, KiteKat, Chappi, Catsan 26. Success Mantra Lower investment in resources. The firm benefits from specialisation. Provides scope for greater knowledge of a segment of the market. Makes entry to new markets easier and less costly. Firms using a focus strategy often enjoy a high degree of customer loyalty. 27. Risk Involved Limited opportunities for growth. The firm could outgrow the market. Danger of decline in the chosen segment or niche. Risk of imitation. Risk of changes in the target segment. A reputation for specialisation inhibits move into new sector. 28. Cost Leadership - Being the lowest cost producer in the industry as a whole Differentiation - The exploitation of a product or service which is believed to be unique Focus - Restricting activities to only part of the market through: - Providing goods or services at lower cost to that segment (cost focus) - Providing a differentiated product or service to that segment (differentiation focus) We have Learnt