Competitive Advantage

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According to the CA model of Porter, a competitive strategy takes offensive or defensive action to create a defendable position in an industry, in order to cope successfully with competitive forces and generate a superior Return on Investment. According to Michael Porter, the basis of above-average performance within an industry is sustainable CA.

2 basic types of CA

  1. Cost Leadership (low cost)
  2. Differentiation

Both can be more broadly approached or narrow, which results in the third viable competitive strategy:

  1. Focus

CA type 1: Cost Leadership

  • Achieving Cost Leadership means that a firm sets out to become the low cost producer in its industry.
  • A cost leader must achieve parity or at least proximity in the bases of differentiation, even though it relies on cost leadership for its CA.
  • If more than one company try to achieve Cost Leadership, this is usually disastrous.
  • Often achieved by economies of scale.

CA type 2: Differentiation

  • Achieving of Differentiation means that a firm seeks to be unique in its industry along some dimensions that are widely appreciated  by buyers.
  • A differentiator can not ignore its cost position. In all areas that do not affect its differentiation it should try to decrease cost; in the differentiation area the costs should at least be lower than the price premium it receives from the buyers.
  • Areas of differentiation can be: product, distribution, sales, marketing, service, image, etc.

CA type 3: Focus

  • Achieving Focus means that a firm sets out to be best in a segment or group of segments.
  • 2 variants: Cost Focus and Differentiation Focus.

Stuck in the middle

  • This is usually a recipe for below-average profitability compared to the industry.
  • Still, attractive profits are possible if and as long as the industry as a whole is very attractive.
  • Manifestation of lack of choice.
  • Especially dangerous for Focusers that have been successful, and then start neglecting their focus. They must seek other Focus niches. Rather then compromise their focus strategy.

Overview of the Book "Competitive Strategy"

  • In Part I, Porter discusses the structural analysis of industries (with the five forces), the three generic competitive strategies (overall Cost Leadership, Focus, and Differentiation), offering an excellent framework for competitor analysis, competitive moves, strategy toward buyers and suppliers, structural analysis within industries (strategic groups, strategic mapping, mobility barriers), and industry evolution (life cycle, evolutionary processes).
  • In Part II, Porter discusses competitive strategy within various generic industry environments. Such as: fragmented industries (with no real market leader), emerging industries, mature industries, declining industries, and global industries.
  • In Part III, Porter discusses strategic decisions which businesses/firms can take. Such as: vertical integration (forward, backward, partnerships), capacity expansion, and entry into new industries/businesses.

Book: Michael E. Porter - Competitive Strategy

Book: Michael E. Porter - Competitive Advantage

Special Interest Group

Competitive Advantage Special Interest Group.

Special Interest Group (568 members)


Forum about Competitive Advantage.


Life Cycle Approach to Competitive Advantage
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Successful Companies: Only Three Rules Needed?
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The Role of AI in Competitive Advantage
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Best Practices

The top-rated topics about Competitive Advantage. Here you will find the most valuable ideas and practical suggestions.

Quotes Competitive Advantage
Do you know some deep, famous or funny quotes on Competitive Advantage? Quotations? Proverbs? Please share them as a rea...

10 Routes to Competitive Advantage
In todays lean, time starved world, competitive advantage is the way forward. I have produced the following 10 routes to...

Case studies in "Cost Leadership"
Are there any recent case studies to demonstrate how firms can compete on the basis of cost leadership?...

Stuck in the Middle?
Why is getting stuck in the middle (=mixing the 3 types of competitive advantage) so problematic? Could an intelligent m...

How Can Logistics Help to Achieve a Competitive Advantage?
How can logistics (transport, warehousing, customer service, inventory control) contribute to a Competitive Advantage (C...

Changing from a Cost Leadership Strategy Into Differentiation
I'm wondering how enterprises which have a cost leadership strategy turn into a differentiation strategy. Please advise....

Competition versus Cooperation
Porter has undermined society with his over-emphasis on competition. Co-operation should be the driver of business and p...

Competitive Advantage or Die?
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What is Competitive Advantage?
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Competitive Advantage in a Monopolistic Market?
Can Porter's competitive advantage work in monopolistic markets, such as utility companies where the product they sell i...

Health/Fitness Club Industry Analysis
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What are the Risks of a Differentiation Strategy?
What are the risks involved when using differentiation as a competitive strategy? Why?...

Weaknesses of Porter's Three Basic Types of Competitive Advantage
Mouillot (2013) argues that although Porter's three basic types of Competitive Advantage are very useful with regard to ...

4 Stages of Hypercompetition
D'Aveni argues sustainable competitive advantage is not really possible. He shows a mechanism that causes faster and fas...

Expert Tips

Advanced insights about Competitive Advantage. Here you will find professional advices by experts.

Sustained Competitive Advantage

Industry Competitiveness
As claimed by M. Porter the only way to sustain a competitive advantage is to upgrade it over time – to move to more sop...

Not Generic Strategies...:

Pseudo Strategies!
All the following categeories are NOT generic strategies according to Porter: - Build / Hold / Harvest / Liquidate / Qu...

Differentiation and 5 Forces

Influence of Differentiation
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Low-Cost Strategy

The main Risks of a Low-Cost Strategy are:The cost leadership is not sustained, because of: - competitors imitatating ...

Focus Strategy

The main Risks of a Focus Strategy are: 1. The focus strategy is imitated 2. The target segment becomes structurally u...

Differentiation Strategy

When to apply
Differentiation strategies tend to work best in following market circumstances: - The needs and uses of buyers are div...

Extreme Customer Trust as a Source of Competitive Advantage

Competitive Advantage, CRM, Customer Loyalty, Customer Intimacy
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The Key Role of Strategists in Creating Competitive Advantage

Business Strategy, Corporate Strategy, Competitive Advantage, Strategy Education
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Knowledge as Competitive Advantage

The New Form of Advantange
In an interview of Tomas Friedman to Hani Iskander, former CEO of Chevron Middle East Ltd who was negotiating a partners...

Factors to Create a Sustainable Competitive Advantage

Porter's SCA Factors
In HBR article “What is strategy”, Nov-Dec 1996, M. Porter discusses the critical factors that help to create a sustaina...
Information Sources

Various sources of information regarding Competitive Advantage. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops.

How to Sustain Competitive Advantage?

Business Strategy, Sustaining Competitive Advantage, Sustainable Competitive Advantage,
This presentation is about the question how a competitive advantage can be sustained. The presentation begins with compe...

The Role of Value Chain Functions, Quality Management and Innovation in Competitive Advantage

Value Chain Management, Quality Management, Innovation, Operational Excellence
This presentation firstly presents the role of functional strategies and the value chain in the achievement of competiti...

How Businesses can Use Information Technology (IT) in Strategic Ways

Strategic Management, Information Technology
This presentation looks at Information Technology from a strategic point of view. In other words, it discusses in what w...

Competitor Analysis

External Strategic Analysis
Presentation by G.M.H. Broekema about competitor analysis as part of external strategic analysis. Included: Steps to com...

Introduction to Competitive Strategy: The 3 Circle Model

Initial Understanding of Competitive Strategy
Prof. Joe Urbany goes to the heart of Competitive Strategy by explaining the Three Circles of Competitive Strategy: 1. ...

Porter's Industrial Organization Versus Barney's Resource Based View

Business Strategy, Value Chain Management
This presentation compares Porter's competitive advantage thinking with Barney's Resource Based View, focusing on how co...

Porter: Misconceptions about Strategy and Competitive Advantage

Understanding Strategy and (Sustainable) Competitive Advantage
Prof. M. Porter mentions some big mistakes when people are mixing up "strategy" with other kind of goals and objectives ...

Developing a (Sustainable) Competitive Advantage

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Competitive Advantage Diagram

Download and edit this 12manage PowerPoint graphic for limited personal, educational and business use. Republishing in ...

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Compare with CA: Value Chain  |  Value Disciplines  |  Parenting Advantage  |  Positioning  |  Core Competence  |  Rule of Three  |  Strategic Types  |  Delta Model  |  BCG Matrix  |  Growth Phases  |  Distinctive Capabilities  |  Acquisition Integration Approaches  |  Diamond Model  |  Relative Value of Growth  |  Experience Curve  |  Twelve Principles of the Network Economy  |  Blue Ocean Strategy

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