Figure 2: Porter's Generic Strategies Porter’s Generic Strategies and SME Performance
Porter (1980) described the specific strategies of cost leadership, differentiation, and focus generic strategy. Porter (1980, 1985) contended that business organizations consist of either differentiation or low cost main classes of competitive advantage. In line with the argument, firm managers who use any of these strategies should realize above-average firm performance. In addition, firm managers have to make important strategic choice to either compete in broad markets or focus on specific market segments because resources are not limitless leading to a focus strategy. A business organization may therefore use cost strategy or a differentiation strategy …show more content…
For SMEs cost-efficient production is a principal requirement for growth (Leitner & Güldenberg, 2010). According to Block, Kohn, Miller and Ullrich (2015), cost leadership strategies seem to be more accessible to those with few resources. Business managers that are willing to work with little money hire friends and family with little or no skills and may run an economical operation, which attracts clients with low …show more content…
Akaeze, 2016; Mboko & Smith-Hunter, 2010). According to Besser and Miller (2010), the first five years of a business' startup is the most vulnerable period which majority of businesses do not survive beyond. Larger corporations financially benefit greatly from improved efficiency that leads to reduced costs. Because of limited financial resources, SME owners face challenges in competing with larger businesses. However, small business owners are more effective when they create sales by carving out a niche for themselves among consumers (Robinson & Stubberud, 2013). Factors responsible for small business failures are both internal relating to the owners individual characteristics, managerial abilities, and so on and external factors which are conditions that are outside the business owner’s control such economy, government regulations, and so on (Albuquerque, Filho, Nagano, Junior & Philippsen.
Porter (1980) described the specific strategies of cost leadership, differentiation, and focus generic strategy. Porter (1980, 1985) contended that business organizations consist of either differentiation or low cost main classes of competitive advantage. In line with the argument, firm managers who use any of these strategies should realize above-average firm performance. In addition, firm managers have to make important strategic choice to either compete in broad markets or focus on specific market segments because resources are not limitless leading to a focus strategy. A business organization may therefore use cost strategy or a differentiation strategy …show more content…
For SMEs cost-efficient production is a principal requirement for growth (Leitner & Güldenberg, 2010). According to Block, Kohn, Miller and Ullrich (2015), cost leadership strategies seem to be more accessible to those with few resources. Business managers that are willing to work with little money hire friends and family with little or no skills and may run an economical operation, which attracts clients with low …show more content…
Akaeze, 2016; Mboko & Smith-Hunter, 2010). According to Besser and Miller (2010), the first five years of a business' startup is the most vulnerable period which majority of businesses do not survive beyond. Larger corporations financially benefit greatly from improved efficiency that leads to reduced costs. Because of limited financial resources, SME owners face challenges in competing with larger businesses. However, small business owners are more effective when they create sales by carving out a niche for themselves among consumers (Robinson & Stubberud, 2013). Factors responsible for small business failures are both internal relating to the owners individual characteristics, managerial abilities, and so on and external factors which are conditions that are outside the business owner’s control such economy, government regulations, and so on (Albuquerque, Filho, Nagano, Junior & Philippsen.