Strengthen Customer and Suppliers Intimacy

Porter (1985) proposed cost leadership, differentiation, and niche strategies for Competitive Advantage. Additional strategies have been proposed by other strategic management authors (e.g., Neumann, 1994; Wiseman 1988; Frenzel,1996).

So, actually, the core strategic of Porter’s just three, and the others are the addition of another. One example of the other generic strategies is Strengthen Customer and Suppliers Intimacy.

Already recognized by businesses if the customer has the bargaining power. To make customers remain faithful and loyal, customer bargaining power should be reduced. Customers must be locked to remain faithful and loyal. The most effective way to lock customers to remain loyal is to create switching costs / moving expenses. Examples are from the company McKesson Corp., a drug company. McKesson provides terminals to its customers, drug stores and pharmacies that are used to ordering medications online. McKesson Customers have 2 (two) alternatives, order drugs on the McKesson to provide multiple benefits by saving some kinds of expenses like the cost of error, the financial cost, the cost of time and cost of convenience. Or order to the suppliers of other drugs by issuing a telephone fee, the cost of fax paper, the risk of mistakes in reservations and lack of comfort in an order.

Suppliers have bargaining power to determine prices of goods and delivery time, especially for goods that are rare or rapidly absorbed in the market or the goods that have a high demand from consumers. The power supply can be offset by way of causing competition among suppliers and selecting suppliers for the best. One example is retail Macro (Indonesia). The company is asking its suppliers to control their own inventories and check shipping invoices and bills itself suppliers via the web / internet and IT interrelate with its suppliers. In this way, Macro save inventory costs and other administrative costs and improve data accuracy and efficiency of work and to select the best suppliers to market similar products.

A Combination of Generic Strategies

- Stuck in the Middle?

These generic strategies are not necessarily compatible with one another. If a firm attempts to achieve an advantage on all fronts, in this attempt it may achieve no advantage at all. For example, if a firm differentiates itself by supplying very high quality products, it risks undermining that quality if it seeks to become a cost leader. Even if the quality did not suffer, the firm would risk projecting a confusing image. For this reason, Michael Porter argued that to be successful over the long-term, a firm must select only one of these three generic strategies. Otherwise, with more than one single generic strategy the firm will be "stuck in the middle" and will not achieve a competitive advantage.

Porter argued that firms that are able to succeed at multiple strategies often do so by creating separate business units for each strategy. By separating the strategies into different units having different policies and even different cultures, a corporation is less likely to become "stuck in the middle.."

However, there exists a viewpoint that a single generic strategy is not always best because within the same product customers often seek multi-dimensional satisfactions such as a combination of quality, style, convenience, and price. There have been cases in which high quality producers faithfully followed a single strategy and then suffered greatly when another firm entered the market with a lower-quality product that better met the overall needs of the customers.