Trader Joe’s Generic Strategies
Michael Porter’s generic strategies were introduced in 1980 and the model highlights how a company pursues a viable benefit by implementing the right strategies. Michael Porter’s framework focuses on differentiation, cost leadership, and focus. Competitive advantage is initiated by lowering cost of products and services or discerning company offers from competitors to validate exceptional prices (Baker, 2010). However, companies can as well gain competitive advantage by selecting a focus strategy via broad focus strategy, niche marketing, or industry-wide strategy. Strategic generic choices vary according to the scope and type of competitive advantage.
Trader Joe’s Company is one of the highly recognized multinational firms in the targeted market section. Competition in the targeted market segment has constantly intensified hence making it a challenge for Trader Joe to improve market share and withstand a leadership position in the market without exercising a substantial effort. The challenging business environment constrains Trader Joe to acquire a critical benefit over other competitors to stay ahead (Taylor, 2012). Trader Joe is a globally recognized brand and highlights its competitive position based on vital aspects providing a resilient advantage over rivals as well as its competitors. The competitive advantage strategies implemented by Trader Joe can be described through the Michael Porter’s intensive and generic model of growth.
Trader Joe Company adopts a combination of focus strategies, differentiation, and cost leadership in handling pressure from its competitors and rivals. The sales growth and customer based expansions are attained by focusing on the intensive growth strategies in relation with the three strategies put in place. Trader Joe adopted product development, market penetration, and diversification as one of the intensive growth strategies to attain growth.
Cost Leadership and Differentiation strategies; value creation and a comparative advantage.
Multinational firms like Trader Joe use three essential Porter’s generic strategies in achieving developmental goals; cost leadership, differentiation, and focus strategy. Cost leadership strategy involves attaining a competitive edge through lowering the cost of products and services in the market. Trader Joe used cost leadership as one of the generic strategies in the market. The company, Trader Joe uses cost leadership strategy in preserving market leadership status via a well-organized value chain management. The cost leadership strategy allows Trader Joe to develop market share by targeting the largest customer portion in many countries, the middle class.
The pricing factor plays an important role for the middle class consumers and therefore, cost leadership is regarded as one of the best strategies to meet the needs of customers in this segment. Trader Joe aims at making its products and services easily accessible and affordable thus growing its brand, sales, and provides a competitive edge in the market (Taylor, 2012). Apart from maximizing the efficiency of supply chain and lowering the cost of production to meet low prices for its customers, Trader Joe offers coupons and discounts to meet the set sales target and handle the pressure of competition in the market. The ultimate goal of these strategies is to encourage consumption and increase popularity of the brand.
Differentiation is one of the common types of generic strategies used to create a competitive advantage in the market. Trader Joe applies the strategy of differentiation along with cost leadership strategy to attain the set growth objectives in the company. Trader Joe uses differentiation as a secondary generic strategy to enlarge its customer base through accentuating the uniqueness of their products features (Meissner & Wulf, 2015). The strategic objective of differentiation as used by Trader Joe Company is to distinguish by addressing the growing health concerns of the customers and embed innovation. For instance, Trader Joe extending its product line after identifying the changing interest of the consumers thus expanding its scope of opportunities and differentiating themselves from competitors in the industry.
Trader Joe has been able to build a loyal and strong customer base as a result of the implementation of cost leadership and differentiation generic strategies. The differentiation generic strategy enables Trader Joe to make its products exceptional and different from other substitutes in the market, and acts as a tool of reducing pressure from rivals and competitors (Galpin, 2019). Trader Joe uses celebrity endorsements, advertisements, and marketing to stand out different from other entities. The company also uses its logo as a resilient differentiating factor to stand out and stay different from other companies.
References
Baker, M. J. (2010). Growth Strategies. Wiley International Encyclopedia of Marketing.
Galpin, T. J. (2019). Strategy beyond the business unit level: corporate parenting in focus. Journal of Business Strategy.
Meissner, P., & Wulf, T. (2015). The development of strategy scenarios based on prospective hindsight: an approach to strategic decision making. Journal of Strategy and Management, 8(2), 176-190.
Taylor, E. C. (2012). Competitive improvement planning: using Ansoff’s matrix with Abell’s model to inform the strategic management process. In Allied Academies International Conference. Academy of Strategic Management. Proceedings (Vol. 11, No. 1, p. 21). Jordan Whitney Enterprises, Inc.