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Companies use different generic approaches to achieve their growth and profit making objectives (Ormanidhi & Stringa, 2008). The generic strategies adopted by a firm define the position the firm takes in remaining relevant in the market. Every business concentrates on doing profitable business and outdoing its competitors. GlaxoSmithKline (GSK) plc is a leading pharmaceutical manufacturer and distributor worldwide.
Research demonstrates that there are four generic spaces that firms adopt to achieve their competitive advantage. The first space involves a firm providing ordinary products at low cost, the cost being the attribute that will attract buyers.
The second space involves a firm providing special products at high prices, the so called premium pricing. The other two spaces encompass market. A firm’s market may be narrow and target a given group of customers. A firm’s market may also be broad and involve various products and clients in diverse geographical locations (Ormanidhi & Stringa, 2008).
GSK uses cost and differentiation focus to achieve and maintain its competitive advantages for its pharmaceutical products. GSK products are perceived by many consumers as being unique in the healthcare industry (differentiation). Many customers of GSK believe that the firm produces and markets only the original drugs and other healthcare products.
Many customers have the perception that original drugs cure diseases and health conditions better than the generic drugs. The cost strategy used by GSK to gain and maintain competitive advantage for various products is quite complex. For some products, the firm uses premium pricing while for others it uses low cost for ordinary products.
The combined generic strategy approach adopted by GSK is quite advantageous in its operations. One of the advantages is that the approach attempts to balance the sales of products manufactured by the firm. Secondly, the firm uses the combined generic strategy approach to grow sales of products that are not doing well in the market. For example, the company may reduce the cost of a drug that is low in sales.
The low sales of the drug could be explained by lower prices of a similar drug from competitors. The disadvantage of using the combined generic strategy approach is that a firm can wrongly assume that a product will sell to outdo its competitor (Ormanidhi & Stringa, 2008).
References
Díez‐Vial, I. (2009). Firm size effects on vertical boundaries. Journal of Small Business Management, 47(2), 137-153.
Ormanidhi, O., & Stringa, O. (2008). Porter’s model of generic competitive strategies. Business Economics, 43(3), 55-64.
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