Porter’s Generic Strategies
Lagunitas Brewing Company (LBC) uses the differentiation strategy in its business. The strategy is one of the generic strategies suggested by Michael Porter, and it involves a firm seeking to be unique in perspectives that create value for buyers (Porter, 1980). LBC produces tasty and quality beer with label artwork.
The company does not consider itself a traditional or modern producer; but it gives customers a unique experience with an image and marketing brand of humor, personality, intelligence and art. The company’s customer service and social responsibility activities also make the business unique.
The company performs well due to its differentiated products targeting different market segments. The quality of the beer rather than the price gives consumers great value and experience, leading to increased customer base for the company. As a result, the company has been expanding significantly in the United States by increasing its production capacity and opening new production plants, including Chicago in 2011.
Strategic Group Map
The company rose from a startup in 1990s to a level of competing with big domestic competitors such as Miller-Coors, and reaching 2,400 craft breweries in 2013 with thousands others under development. In the strategic group map, the company is located in a region with high quality and many localities. In this position, the company competes with large companies that produce a large geographic coverage areas and a high number of market segments served.
Porter’s Five Forces of Competition
The element of competitive rivalry in Porter’s Five Forces shows that high number of competitors reduce profitability in the industry (Porter, 2008). Several traditional and modern companies have already started to implement craft brewing, so competition is increasing.
There are few barriers of entry in the industry, and marketing is necessary to win customers.
The bargaining power of suppliers is also high because there are several businesses using the same raw materials. Thus, the business should develop effective relationship with suppliers to enhance constant supply of raw materials at low costs.
The company also faces medium bargaining power of customers and high level of threats of substitution due to increased producers of alcoholic and non-alcoholic drinks in the U.S.
Recommendations
- The advice that I would give to Magee, the owner of the business, is to use aggressive digital marketing activities to increase its audience and develop stronger relationship with customers.
- LBC should strengthen its position in the market through effective relationship management.
