Porter (1980) described three general types of strategies that are commonly used by businesses These three generic strategies are defined along two dimensions strategic Scope Strategic Strength

Generic Strategy Strategic Scope is a demand side dimension and looks at the size and composition of the market you intend to target Strategic Strength is a supply-side dimension and looks at the strength or core competency of the firm

5 Differentiation Low-cost leadership Focus

Firstly, Cost Leadership. LCCs must maintain a sustainable low-cost advantage over their full service competitors. LCCs must ensure that their costs per passenger-km continue to be 50 per cent or more below those of full-service airlines and continuing to reduce their own costs too

11 REQUIREMENTS FOR GENERIC COMPETITIVE STRATEGIES Generic Commodity RequiredCommon Organizational StrategySkills and ResourcesRequirements Overall cost  Sustained capital investment  Tight cost control leadership access to capital  Frequent, detailed control reports  Process engineering skills  Structured organization and responsibilities  Intense supervision of labour  Incentives based on  Products designed for ease meeting strict quantitative  Low-cost distribution system targets in manufacture

Secondly, Differentiation Strategy. LCCs must focus on differentiation of their product, that mean they must also offer a product with some frills, which is very highly rated by passengers in terms of value for money The strategies of most LCCs are twofold; to take on the legacy carriers and attract higher-yield passengers, and to add points of difference from other LCCs

13 REQUIREMENTS FOR GENERIC COMPETITIVE STRATEGIES Generic Commodity RequiredCommon Organizational StrategySkills and ResourcesRequirements Differentiation  Strong marketing abilities  Strong coordination  Product engineering among functions in R&D,  Creative flare product development, and marketing  Strong capability in basic  Subjective measurement and research incentives instead of quantitative measures  Corporate reputation for  Amenities to attract highly quality or technological skilled labour, scientists, or leadership creative people  Long tradition in the industry or unique combination of skills drawn from other businesses  Strong cooperation from channels

Thirdly, Market Share /Market Segmentation/ Focus Strategy. The airline has to decide as to which marketing segment he is targeting and what kind of focus it require. Generic Commodity RequiredCommon Organizational StrategySkills and ResourcesRequirements Focus  Combination of the above  Combination of the above policies policies directed at the directed at the regular strategic particular strategic target target

15 RISKS OF THE GENERIC STRATEGIES Risks of Cost LeadershipRisks of DifferentiationRisk of Focus Cost of leadership is notDifferentiation is notThe focus strategy is sustainedsustainedinitiated :  Competitors imitateThe target segment Competitors imitate:  Bases for differentiationbecomes structurally unattractive Technology changesbecomes less imported to  Structure erodes Other bases for costbuyers  Demand disappears leadership erode Proximity in differentiationCost proximity is lostBroadly targeted is lostcompetitors overwhelm the segment:  The segment’s differences from other segments narrow  The advantages of a broad line increase Cost focusers achieve Differentiation focusers New Focusers sub-segments even lower cost in segmentsachieve even greaterthe industry differentiation in segments