1. 1
PORTER’S GENERIC
COMPETITIVE STRATEGIES

2. COMPETITIVE AdVANTAGE &
COMPETITIVE STRATEGy
Competitive advantage
Competitive advantage implies gaining the
edge on others – using resources &
capabilities
competitive strategy
• Consists of business approaches to
– Attract customers by fulfilling their expectations
– Withstand competitive pressures
– Strengthen market position

3. PORTER’S GENERIC COMPETITIVE
STRATEGIES
Competitive advantage come from one of two
sources:
Having the lowest cost in the industry
Possessing a product or offering a service that is
perceived as unique in the industry
Another important factor is the scope of the
product-market (broad or narrow)
Mix of these factors provide basis for
Cost leadership strategy (low-cost strategy)
Differentiation strategy
Focus strategy

4. 4
Generic Building Blocks of
Competitive Advantage

5. 5
Generic Strategies
Differentiation
Low-cost
leadership
Focus

6. PORTER’S GENERIC COMPETITIVE
STRATEGIES
Market
Scope
Competitive Advantage
Low Cost Differentiation
Broad
Narrow
Cost Leadership Differentiation
Focus
(Low Cost)
Focus
(Differentiation)

7. COST LEAdERShIP
STRATEGy
• Objective:
– Gain sustainable competitive advantage over
competitors, using low-cost (not price)
– Produce for broad customer base
Low cost implies OVERALL LOW COST
Not just low manufacturing or production cost
Product quality cannot be ignored

8. ChARACTERISTIC Of COST
LEAdERS
Strict attention to production controls
Rigorous use of budgets
Little product differentiation
Limited market segmentation
Emphasis on productivity improvements

9. dIffERENTIATION
STRATEGy
• Objective
– Offering products/services perceived as unique
over the brands of rivals in an industry
• Keys to Success
– Offer products/services that create value to
customers
– Offer products/services not easily matched or
easily copied by rivals
– Not spending more to differentiate the firm’s
products or service than the price premium that
can be charged

10. Benefits of Differentiation
• A product / service with unique and
appealing attributes allows a firm to
– Command a premium price and/or
– Increase unit sales and/or
– Build brand loyalty
= Competitive Advantage

11. Focus strategy
Firm pursues either a cost leadership or
differentiation strategy but in a narrow
customer group of segment
Concentrates on serving specific market
niche
Geographical area
Type of customer -- specific group of customers
Specific & specialized product line

12. Focus Strategy
Objective
Serve the niche customers better than
competitors
Keys to Success
Choose a market niche where buyers have
distinctive preferences, special
requirements, or unique needs
Develop unique capabilities to serve needs of
target buyer segment

13. Focus Approaches
Approach 1: Cost Advantage
Achieve lower cost than rivals in serving the
specific or narrow segment
Approach 2: Differentiation
Advantage
Offer customers in niche market something
unique in that market
Product features
Product innovations
Product quality
Customer responsiveness

14. Examples of Focus Strategy
– Rolex: Serve highest end of wristwatch market
(premium pricing & image)
Rolls-Royce: Serving luxurious end of automobile
market (premium pricing & image)

15. © Ram Mudambi,
Temple University,
2007 3-15
The Sustainability of
Competitive Advantage
Barriers to imitation
Speed of imitation by competitors in reducing
advantage
Imitation by acquiring similar resources
Imitation of capabilities (more difficult)
Limits on competitors
Prior strategic commitments
Absorptive capacity for change
Industry dynamism
The rapid innovation
shortens product life cycles.

16. 3-16
Why Do Companies Fail?
What went wrong?
Inertia
Companies find it difficult to change their
strategies and structures
Prior strategic commitments
Limit a company’s ability to imitate and
cause competitive disadvantage
The Icarus paradox

17. 3-17
Avoiding failure and sustainingAvoiding failure and sustaining
competitive advantagecompetitive advantage
Focus on the building blocks of competitiveFocus on the building blocks of competitive
advantage.advantage.
Institute continuous improvement andInstitute continuous improvement and
learning.learning.
Track best industrial practice and useTrack best industrial practice and use
benchmarking.benchmarking.
Overcome inertia.Overcome inertia.