Generic strategies

We’ve had countless discussions with business owners and managers through the years about the generic strategies that they employ. Do they try to offer the lowest prices? Or do they try to differentiate themselves by offering exemplary service or outstanding products?

Many times these managers have acted surprised at these questions. In our business, they say, we have to give the customer all three—that’s what they want.

This is actually a difficult discussion for many owners and managers, and it may be for you also. You may feel like many business owners and managers: you have lots of competitive pressure in your business and you’re probably trying to find customers wherever and whenever you can. You want to keep as many folks happy as possible, so you try to give them what they want (the lowest prices, the best service, the best products).

Unfortunately, this is virtually an impossible task. The companies that excel as being low-cost providers, customer focused, or exemplary product leaders have widely varying characteristics, as we’ll discuss, including:

- The nature of the customers.

- The degree of standardization in day-to-day operations.

- Focus on buying power.

- Focus on innovation.

- Degree of autonomy for employees.

- Degree of centralized management.

The following is a diagram that illustrates the process of choosing a generic strategy. Here’s how we think about this. If you can successfully distinguish your organization through great service or products, you should be able to charge prices that allow you to be profitable. If you can’t distinguish your organization, or if you choose to be the low cost provider (such as Costco or Wal-Mart), you’ll need to operate very efficiently in order to offer low prices and still make a profit.

Choosing a Generic Strategy