Porter’s competitive advantages

What is a competitive advantage?

An advantage over competitors gained by offering consumers

greater value, either by means of lower prices or by providing greater benefits and services

Porter’s Generic Strategy Framework

Target scope Advantage(Low cost)

Advantage(Product

uniqueness)

Broad(Industry wide)

Cost Leadership Differentiation

Narrow(Market wide)

Focus Strategy(low cost)

Focus Strategy(differentiation)

Cost leadership

With this strategy, the objective is to become the lowest-cost producer in

the industry.

Why is cost leadership important?• If selling price are broadly similar, the lowest-cost

producer will enjoy the highest profits• It is very effective when many buyers are price

sensitive

Differentiation strategy

A differentiation advantage is when a business products or services are different to similar competitors.

Focus Strategy

It ideally tries to get businesses to aim at a few target markets rather

than trying to target everyone.Also known as Niche strategy

The focus strategy has two variants

Cost Focus

A firm seeks a cost advantages in its target segment

Differentiation Focus

A firm seeks differentiation in its target segment

Stuck in the middle

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