Selecting among alternative generic strategies for gaining competitive advantage: Past, Present, and Future.

October 7, 2022

Selecting among alternative generic strategies for gaining competitive advantage: Past, Present, and Future.

The title of the blog may seem a misnomer since unlike grand strategies of which there are at least a dozen alternatives/options organizations may choose from and implement to achieve their long-run objectives. The alternative generic strategies available to organizations for gaining a competitive advantage, on the other hand, are a bit narrower. Porter’s competitive strategy typology is the most popular, internally consistent, and academically well-accepted framework, however, there are also a number of less popular frameworks. Given that the external environment exerts measurable influences on Porter’s five forces that shape strategy, businesses may have to craft appropriate responses by altering their existing business-level strategy to gain/retain/enhance competitive advantage.  Overall cost leadership, differentiation, and focus positions are the three generic-business level strategies often mentioned in the strategy literature and implemented in practice by U.S. and other companies worldwide and across a broad spectrum of industries. Professor Porter argued that strategic advantage can be gained by concentrating on either the superior cost strategy or the differentiation strategy. In other words, companies perform best by choosing one strategy to concentrate on, i.e. Porter’s generic strategies are mutually exclusive.  The conclusion from a number of competitive strategy studies lends support to Porter’s mutually exclusive generic strategies perspective by suggesting that the singular focus on either the superior cost or differentiation strategy leads to larger market share which then ultimately leads to higher profitability. The common characteristics shared by the leading companies pursuing the superior cost position or the differentiation strategy do not vary across industries. It is noteworthy to understand some researchers contend that a combination of these strategies (i.e. integrated/mixed/ambidextrous strategy) may offer a company the best chance to achieve a competitive advantage. In fact, Porter also did suggest that cost leadership and differentiation can be simultaneously pursued under certain rare conditions but it is unclear how this integrated strategy could be successfully implemented. Apple is an example of an entity that implements the highly differentiated strategy whereas Walmart pursues the superior cost leadership strategy. The mutual exclusivity of the generic strategy framework (i.e. singular generic strategy)   was posited/ advanced more than three decades ago when developed markets and developed markets multinationals (DMMEs) dominated both the global economy and the global competitive landscape.  Fast forward to the 21^st century’s hyper competitive VUCA environment and the question every operating entity but especially the forward thinking entities which seek to formulate and implement competitive strategies for sustainable profitable growth,  capture/enhance/retain market share  must ask is why, when and how do we implement the integrated strategy for sustainable competitive advantage? Now, if you are a business owner, CEO, or a business executive, what should make you sleep like a baby, i.e. wake up every two hours crying? Well, first, the accelerated innovation and accelerated internationalization of emerging market multinationals (EMMEs). Second, the rising phenomenon termed globality and the fact that in long run globalization is irreversible.  Finally, the successful implementation of the integrated/mixed/ambidextrous generic strategy by EMMEs especially select entities from China. To contextualize the argument, let’s take the case of Apple in China and how it lost relatively significant market share to local competitors pursuing the integrated strategy and in particular the market share gains by the relatively new competitors Oppo and Vivo and before Oppo/Vivo, Xiaomi.  Apple is and will continue to be a formidable juggernaut so we give credit where it is due.  In fact, Apple’s market share in China and globally seem to be stabilizing and since Apple has not altered its differentiation business strategy,  then one could argue that the lone singular generic strategy or mutually exclusive generic strategy perspective is just as useful today as it was four decades ago. However, from the author’s humble perspective the utility of the lone/singular generic strategy in the 21^st century is open to debate for a number of reasons but especially because; 1) consumers in the rapidly developing economies of Asia, Africa, LATAM and MENAT which are also perhaps largest market for smartphones and basic consumer products seem to have embraced the “good enough” value propositions delivered at relatively affordable prices so that consumers who are seeking to buy relatively “high quality products” with similar functionalities as the premium priced highly differentiated offerings of DMMEs can afford to buy them and this is a game changer in the long run framework. Consequently, it is proposed that the integrated strategy rather than the popular lone/singular generic strategy of the 20^th century should be the optimal competitive strategy implemented by profit seeking entities worldwide in the 21^st century.