Three Generic Strategies

Three generic strategies is a framework for defining a strategy based on deciding between competing in a broad context or a narrow one, and then doing so via a low cost or a differentiation approach. It can be used as guidelines or as a logical point of departure for strategy development.

Methodology

1. Define where to compete. Define the key segments of the market. Determine how well the company is positioned relative to its competitors. Choose between a head-on approach and one that avoids competition.
2. Define how to compete. Study the value chain. Determine capabilities relative to competition in terms of cost or offering.
3. Choose and act on a strategy. Choose among the three generic strategies or tailor a specific strategy to the company that uses a combination of the generic strategies.

Notes

• Should be used in terms of structuring thinking about strategy at a very high level—not at a specific level

Strengths

• Useful point of departure for further strategy development

Weaknesses

• Highly generic and vague in nature