Porters 3 Generic Strategies [PDF]

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STRATEGIC BUSINESS ANALYSIS Porter’s 3 Generic Strategies

ANILAO, ELIJAH JOYCE M. AQUINO, ERIKA JOY L. MARAÑO, DONITA MAE P. MERCADO, ANGELO T. RESTITUTO, EVE JEREMY Q. BSA III C061 TTH 1:00 - 2:30

PROF. ROMERICO A. ALVAREZ Adviser

COST LEADERSHIP STRATEGY A. Name of the company: Jollibee Foods Corporation

Jollibee is the leading fast-food chain in the Philippines, operating a network of over 1,150 stores nationwide. As a dominant market leader in the Philippines, Jollibee enjoys the lion’s share of the local market that is more than all the other multinational

brands

combined.

The

company has also embarked on an aggressive international expansion plan in Vietnam, Brunei, Hongkong, Singapore, Macau, Malaysia, US, Canada, Saudi Arabia, UAE, Qatar, Kuwait, Bahrain, Oman, Italy and the United Kingdom. It operates over 250 overseas outlets in 15 territories around the world.

B. What strategy is it using?

Cost leadership is the main generic strategy that Jollibee Foods Corporation uses in various consumer markets. According to Porter’s 3 Generic Strategies, cost leadership occurs when a company is the category leader for low pricing. In order to successfully achieve this without drastically cutting revenue, a business must reduce costs in all other areas of the business, such as marketing, distribution and packaging. Being a global brand with a strong presence all over the world, Jollibee has set its competitive positioning based on some critical factors including its price that provide a strong edge over rivals including the competitor in the majority consumer markets.

C. Describe how the company implements the strategy. Jollibee’s affordable menu prices garner a broad base of loyal customers. Students and young working adults often look for budget-friendly or quick meals. Rapid urbanization, long work hours and increased living expenses continue fueling the demand for budget fast food. Jollibee helps many Filipino working classes surviving Petsa de Peligro, which refers to the dreaded period between paydays, a term commonly used among Millennial.

This strategy allows the business to expand the market share by targeting the middle class, which makes the largest proportion of overall consumer market mix in most of the countries. Middle class consumers generally place high importance to the pricing factor and cost leadership is the best strategy to cater the needs of this consumer segment.

It focuses on affordability and easy accessibility of its produce across the globe, which leads towards high brand awareness and high sales growth and provides a strong competitive advantage basis. Other than charging low prices by lowering production cost and maximizing supply chain efficiency, Jollibee frequently offers discounts and coupons to achieve sales targets and handle the competitive pressure by its closest rival. The intended outcome of these discount and promotional campaigns is to increase brand popularity and encourage consumption.

This strategy has outlined many benefits, such as- gaining quick brand recognition, expanding the customer base, encouraging consumption and achieving sales targets by emphasizing over product’s affordability and accessibility.

D. Company competitors.

McDonald's Corporation franchises and operates fast-food restaurants in the global restaurant industry. The Company's restaurants serve a variety of value-priced menu products in countries around the world. As the biggest fast food restaurant chain in the world, McDonald’s uses its intensive growth strategies to support continued business development and expansion.

Max's Group, Inc. is the largest casual dining restaurant company in the Philippines. Its vision is to be the leading Filipino company with the most loved brands by 2025. Max’s started with its flagship

brand

Max's

Restaurant,

a

humble

roadside cafe in the home of its founders.

KFC Corporation is an American fast food restaurant

chain

headquartered

in

Louisville,

Kentucky, that specializes in fried chicken. It is the world's

second-largest

restaurant

chain

(as

measured by sales) after McDonald's, with more than 20,000 locations globally in 150 countries as of December 2019.

E. Past and present performances.

Established by Tony Tan Caktiong and his family in 1975, ever since, Jollibee has become the dominant leader in the Philippines despite the entries of McDonald’s and KFC. Jollibee’s line-up products that were introduced during the early 80’s are still best known for today – the Chickenjoy fried chicken, Yumburger and the uniquely sweet Jolly Spaghetti.

From its humble beginning turning to a national favorite, Jollibee has captured the taste buds and hearts of generations of Filipinos through its classic deliciously satisfying burgers, chicken and spaghetti. Started as a two brand ice cream parlor in 1975, Jollibee expanded its product portfolio to venture into the burger business. Over the years, with its in-depth consumer knowledge, Jollibee’s advantage on the Filipino taste and culture was evident and demonstrable. Today, the brand has become a true Filipino icon everywhere in the country. Jollibee captures the mass population where families and kids are the dominant demographic in the Philippines. Jollibee created a strong emotional bond with its core target customer segment – the traditional families – through its compelling media commercials and quality customer services. Jollibee’s thematic advertisements are filled with storylines that echo the importance of Filipino family values. Ever since, Jollibee serves up nostalgia for millions of Filipinos today around the world.

During recent years, the company has been aggressively expanding its global footprint overseas by opening Jollibee stores abroad and acquiring foreign brands, including the recent acquisition of lost-making US-based Coffee Bean & Tea Leaf in Indonesia. Jollibee has been in the coffee business through a previous purchase of Highlands Coffee Shops that have a significant presence in Vietnam.

DIFFERENTIATION A. Name of the company: Ferrari Company

Ferrari Company is an Italian luxury company

engaged

engineering, luxury

in

the

production,

and

performance

sports

design, sale

of

cars.

It

operates in four segments: Sports Range, GT Range, Special Series, and Icona. Ferrari sports cars are among the most prestigious automobiles in the world, along with Porsche, Maserati, Alfa Romeo, Jaguar, and Lamborghini. The company was founded by Enzo Ferrari in 1939 and built its first car in 1940. They got their recognition in 1947 as an auto manufacturer and now earned its name as a racing car.

B. What strategy is it using?

Ferrari obtains competitive advantage by adopting Porter's generic strategies. Ferrari uses differentiation as a strategy that allows the company to compete in areas where unique features of the product are distinguished. In its high competitive market, sustaining its market leadership position appears to be challenging for them while increasing its market share. Ferrari creates a competitive advantage in the prevailing business environment in terms of its luxury performance and design, not just to stand out from their rivals but the desire to stand above it.

C. Describe how the company implements the strategy.

Using the differentiation as a strategy, Ferrari emphasized its products more in a way to standout and makes it superior to alternatives from the market. Increasing market demands for its product and make it different and be more attractive to consumers. In this strategy, as the company focus to be distinctive from the products of competitors, it requires more effort, involves bigger investment in marketing and advertisement. However, it is not just differentiating its products from the other businesses, strong presence from the public and having an extensive experience are some differentiation factors need to be considered for effective marketing. To be popularly known, a unique and attractive logo is one of the important factors to set the differentiation basis. A strong impression is important. Having a unique business logo has a significant effect to every consumer’s mind for the company to be remembered. One of the special features of Ferrari is a special project where Ferrari does in -house personalization

service.

Ferrari

does

self-engineering

and

design.

Sometimes it works in cooperation with external design companies like Fioravanti and Pininfarina.

Up until today, Ferrari is one of the brands that will always be looked up into because of its distinctive products and the fact that it is a luxury brand. It also offers a wide variety of products so that it can match the costumer’s unique taste needs. Using differentiation as a strategy allows the company to speak directly to the relevant consumers and creates impression as the best among all of the products in the same category that it could lie into.

D. Company competitors.

McLaren is one of Ferrari's top competitors. Like Ferrari, McLaren also operates in the Automobile Manufacturers industry. McLaren generates $2.7B less revenue than Ferrari. McLaren Automotive is a creator of luxury and high-performance sports cars.

Lamborghini is a top competitor of Ferrari. Like Ferrari,

Lamborghini

also

competes

in

the

Automobile Manufacturers field. It generates $1.8B less revenue vs. Ferrari. It is an Italian brand and manufacturer of luxury sports cars and SUVs.

Bugatti is a French car manufacturer of highperformance automobiles, founded in 1909 by the Italian-born industrial designer Ettore Bugatti. The cars were known for their design beauty and for their many race victories.

Tesla, Inc. sells fully electric vehicles, and energy storage systems, as well as installs, operates and maintains solar and energy storage products. The Company operates through two segments: Automotive, and Energy generation and storage.

E. Past and present performances.

Ferrari built his first car, the 815, and competed in the 1940 Mille Miglia. World War II temporarily halted Italian industry and motor racing, leading Ferrari to move his operations to Maranello in 1943. After the war’s conclusion, Ferrari set about building his first production car, the 125 S. The 12-cylinder car achieved its first victory at the Rome Grand Prix in 1947.

In 1961, noting production difficulties, Ferrari began negotiating a sale to Ford Motor Company. Enzo backed out of the deal at the last minute, however, infuriating Ford and igniting a fierce racing rivalry (guess Enzo had a knack for making enemies). In 1969, Enzo sold half his company shares to Fiat and resigned as president in 1977. In the 1970s, Ferrari’s first mid-engine V8 road cars hit production, including the 308 GTB, 308 GT4, and 308 GTS. The ‘80s brought significant changes to Ferrari. Fiat increased its stake to 90 percent, Enzo passed away in 1988, and road car performance leveled up. Vehicles like the 288 GTO, Testarossa, and F40 brought the automaker into the modern era of style and power.

Ferrari continues to compete in Formula One though with much less success than the early 2000s. The road car business, however, continues to succeed with new models, variants, and millions of adoring fans. Ferrari is embracing electrification for its next round of sports cars. Up to 60 percent of its vehicle range will be hybridized by 2020 and all models will gain electric help before 2025. Ferrari plans to expand its model range significantly, especially the grand touring (GT) category, but with increases in its model prices, it expects it will remain ultra-exclusive. The Italian automaker will also adopt semiautonomous driving technologies but claims it will retain the pleasure of driving.

DIFFERENTIATION A. Name of the company: Coca-Cola Company

The

Coca-Cola

Company,

American

corporation founded in 1892 and today engaged primarily in the manufacture and sale of syrup and concentrate for Coca-Cola, a sweetened carbonated beverage that is a cultural institution in the United States and a global symbol of American tastes. The company also produces and sells other soft drinks and citrus beverages. With more than 2,800 products available in more than 200 countries, Coca-Cola is the largest beverage manufacturer and distributor in the world and one of the largest corporations in the United States. Headquarters are in Atlanta, Georgia.

B. What strategy is it using?

Coca-Cola targeted this niche market of healthy drinkers through brand extension. This brand-extension strategy is a brilliant example of utilization of the Focus or Niche Market Strategy because focusing on the needs of a niche market that was rapidly increasing will be a merit on Coca-Cola’s company if they satisfy this market’s demands. This strategy is primarily used by small businesses because they can only supply for the demands of a small group of customers, but Coca-Cola smartly applied this strategy although they are a giant company already, because they wanted to be in every type of market.

C. Describe how the company implements the strategy.

As everyone knows, the Coca-Cola Company is a well-known big drinks manufacturer that uses Porter’s focus strategy. Because of its strong brand, it not only makes and delivers their products around the world, but also markets the non-alcoholic beverage concentrates and syrups. The company has a vast portfolio of drinks, beverages, waters, juice, teas, coffees, energy and sports drinks which they products, distribute, market and license all over the world. Meanwhile, Coca-Cola also manages its business in more than 200 countries.

On the other hand, Coca-Cola becomes a successful company and earns great revenue, using its internal and external marketing strategies to overcome most of the other competitors. The company also claims that innovation is at the heart of everything they do and it is one of the reasons why they success. The report aims to analyze the market segmentation for one of the world’s strongest brands Coca-Cola and talks about the different market segmentation variables by theories and practices in the company. Furthermore, the report discusses the targeting and positioning of Coca-Cola Company, it also provides the market for the organization is segmented for the company.

The Coca-Cola Company aims to focus on niche market and work smart. Generally, comparing with old generation, Coca-Cola seems more popular in the younger groups. Especially they put vending machines in schools to gain more profit. A Coca-Cola official said that his company would “continue to be very aggressive and proactive” in going after school business (Marion, 2000). In 2008, the company launched more than 700 new products globally, which was including more than 160 low or no-calorie beverage options. This gives people more options to choose what they want, especially for those people who do not like to drink with too much sugar but water, so diet coke is not the only option for those people anymore.

D. Company competitors.

PepsiCo,

Inc.

engages in the manufacture,

marketing, distribution and sale of beverages, food, and snacks. It is a food and beverage company with a complementary portfolio of brands, including Gatorade, Pepsi-Cola, Quaker, and Tropicana.

Red Bull is one of the strongest growing energy drink/sports drink and is amongst the strongest direct coca cola competitors in terms of brand valuation. The popularity of Red Bull is due to its wide adoption in the pub culture where Red Bull can be mixed in various drinks.

Fanta has close to 100 flavors being used across various

countries.

It

is

also

known

for

a

differentiated marketing message in each of the countries which it operates in.

Mountain dew is a clear carbonated drink from the house of Pepsico. It is known for its clear beverage worldwide but it also has a lineup known as Kickstart.

E. Past and present performances.

The drink Coca-Cola was originated in 1886 by an Atlanta pharmacist, John S. Pemberton (1831–88), at his Pemberton Chemical Company. His bookkeeper, Frank Robinson, chose the name for the drink and penned it in the flowing script that became the Coca-Cola trademark. Under Candler’s leadership, sales rose from about 9,000 gallons of syrup in 1890 to 370,877 gallons in 1900. Also during that decade, syrup-making plants were established in Dallas, Los Angeles, and Philadelphia, and the product came to be sold in every U.S. state as well as in Canada. In 1899 the Coca-Cola Company signed its first agreement with an independent bottling company, which was allowed to buy the syrup and produce, bottle, and distribute the Coca-Cola drink. Such licensing agreements formed the basis of a unique distribution system that now characterizes most of the American soft-drink industry.

The post-World War II years saw diversification in the packaging of CocaCola and the development or acquisition of new products. The trademark “Coke,” first used in advertising in 1941, was registered in 1945.

In the early 2000s Coca-Cola faced allegations of illegal soil and water pollution, as well as allegations of severe human rights violations. In 2001 the United Steelworkers of America and the International Labor Rights Fund (ILRF) filed a lawsuit against Coca-Cola. The controversy gained worldwide attention and led several American universities to ban the sale of Coca-Cola products on their campuses. The lawsuit was eventually dismissed. In 2005 the company introduced Coca-Cola Zero, a zero-calorie soft drink with the taste of regular Coca-Cola. In 2007 the company acquired Energy Brands, Inc., along with its variously enhanced waters.

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