Question

How desirable is the combination strategy (i.e., low-cost and differentiation)? Are most businesses sufficiently equipped to implement such a strategy? Why or why not?

Answer 1

Porters Generic strategies are : Overall cost leadership, Differenciation and Focus.

Overall Cost leadership or low cost strategy refers to achieving the market by keeping the cost as low as possible thereby eliminating its competitors. Whereas differentiation strategy is appropriate where the target customer segment is not price-sensitive, the market is competitive or saturated, customers have very specific needs which are possibly under-served, and the firm has unique resources and capabilities which enable it to satisfy these needs in ways that are difficult to copy.

Both the strategies can be implemented succesfully only for big companies.

Since cost-based and differentiation-based advantages are difficult to sustain, firms that pursue a combination strategy may achieve higher performance than those firms that pursue a singular strategy. Pursuit of a differentiation strategy for low-cost firms will help minimise their vulnerability due to reliance on cost-based advantages only.

A hybrid strategy seeks simultaneously to achieve differentiation and low price relative to competitors. This success strategy depends on the ability to deliver enhanced benefits to the customers with low price while achieving sufficient margins for reinvestment to maintain and develop bases of differentiation.

This new, hybrid strategy, may become even more important--and more popular--as global competition increases. Compared to companies relying on a single generic strategy, companies that integrate the generic strategies may position themselves to improve their ability to adapt quickly to environmental changes and learn new skills and technologies. This would more effectively leverage core competencies across business units and product lines and would also help produce products with differentiated features or characteristics that customers’ value and provide these differentiated products at a low cost, compared to competitors' products. This is because of the multiple, additive benefits of successfully pursuing the cost leadership and differentiation strategies simultaneously.

One of the examples of such strategy being succesfully implemented is walmart.