How Are Porter's Three Generic Strategies, an Above-The-Line Versus a Below-The-Line Approach, and the Rgt Framework Similar?

Michael Porter's three generic strategies are listed as overall cost leadership, differentiation, and focus. Cost leadership involves a given firm gaining market share through an appeal to cost conscious or price sensitive consumers. This can be realized by having the lowest price point in the applicable segment. To achieve this and remain profitable, the firm must decrease its overall operating costs. The differentiation strategy involves building value into a given product through some unique quality. This does not necessarily need to be geared toward price sensitive consumers and works well when a market is already saturated with multiple competitors. Focus refers less to an individual strategy than it does to scope. In other words, narrowing or widening focus on cost leadership or differentiation. Having a narrow focus means niche marketing and a wide focus is used for mass markets.

The Run-Grow-Transform (RGT) framework is an approach in which one would allocate in terms of percentages how you would spend your IT dollars on various types of business strategies. The run facet is all about what a company will spend to maintain existing Information Technology Systems (IT) or the optimization of embedded processes. Growing is the piece that by definition refers to what a company will spend to increase the size of their business. Lastly is the transformation concept which can be described as investments that lead to changing the way a business is operated. This is done by focusing on operational efficiency and the overall effectiveness of the entire organization.

The two methods are similar in the following ways as proposed on Page 25 of the text.

* Run = overall cost leadership = below the line

* Grow = focus and differentiation = above the line

* Transform = (new) differentiation = above the line (when the focus is innovation)