Competitive Advantage

Knowledge Center





The basis of performing above-average within an industry. Explanation of the CA (CA) model by Michael Porter.


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 (475 members)


Forum - Competitive Advantage  

Discussions about Competitive Advantage.


  Quotes Competitive Advantage
Do you know some deep, famous or funny quotes on Competitive Advantage? Quotations? Proverbs? Please (...)
 
 
 
 
  10 Routes to Competitive Advantage
In todays lean, time starved world, competitive advantage is the way forward. I have produced the fo (...)
 
 
 
 
  Case studies in "Cost Leadership"
Are there any recent case studies to demonstrate how firms can compete on the basis of cost leadersh (...)
 
 
 
 
  Competitive Advantage or Die?
To all the sharks out there who seem to have missed the point of cooperation, sharpen your swords an (...)
 
 
 
 
  What is Competitive Advantage?
Is it in simple terms "to be better than your competitors"? Is this correct? (...)
 
 
 
 
  Life Cycle Approach to Competitive Advantage
Rita Gunther McGrath and Ian C. MacMillan in MITSloan Management Review Vol 50 No 3 mention the term (...)
 
 
 
 
  Competitive Advantage in a Monopolistic Market?
Can Porter's competitive advantage work in monopolistic markets, such as utility companies where the (...)
 
 
 
 
  Health/Fitness Club Industry Analysis
I am the Marketing consultant of a Health & fitness club in Maseru, the capital city of Lesotho. Wit (...)
 
 
 
 
  4 Stages of Hypercompetition
D'Aveni argues sustainable competitive advantage is not really possible. He shows a mechanism that c (...)
 
 
 
 
  Knowledge Management is more important than CA
An authentic - that means, in simple words: not easy to be copied - Competitive Advantage in the con (...)
 
 
 
 
Hot Why are Firms Different? Why Successful Firms Differ?
It is an obvious fact that firms differ. However, according to Carroll (1993) it is important to dis (...)
 
 
 
 
  Cost and Value in Analysis of Competitive Advantage: 2 Sides of the Same Coin?
COST and VALUE are words used to identify the same quality, but from different viewpoints. The produ (...)
 
 
 
 
  Successful Companies: Only Three Rules Needed?
Raynor and Ahmed did a statistical study of a large amount of companies and discovered that just 3 s (...)
 
 
 
 

Best Practices - Competitive Advantage

Here you find the most valuable discussions from the past.


  Stuck in the Middle?
Why is getting stuck in the middle (=mixing the 3 types of competitive advantage) so problematic? Co (...)
 
 
 
 
  How Can Logistics Help to Achieve a Competitive Advantage?
How can logistics (transport, warehousing, customer service, inventory control) contribute to a Comp (...)
 
 
 
 
  Changing from a Cost Leadership Strategy Into Differentiation
I'm wondering how enterprises which have a cost leadership strategy turn into a differentiation stra (...)
 
 
 
 
  Competition versus Cooperation
Porter has undermined society with his over-emphasis on competition. Co-operation should be the driv (...)
 
 
 
 
  Focus your Efforts in Building Competitive Advantage
In any given company, there are hundreds of fields where you can improve. The key thing to do is to (...)
 
 
 
 
  What are the Risks of a Differentiation Strategy?
What are the risks involved when using differentiation as a competitive strategy? Why? (...)
 
 
 
 
  Competitive Advantage in Tough Times
Does need to change, in tough times, imply that one has to do things different or different things? (...)
 
 
 
 
  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 us (...)
 
 
 
 

Expert Tips - Competitive Advantage

Here you will find advices by experts.


 

Sustained Competitive Advantage

Industry Competitiveness (...)
 
 
 

Not Generic Strategies...:

Pseudo Strategies! (...)
 
 
 

Differentiation and 5 Forces

Influence of Differentiation (...)
 
 
 

Low-Cost Strategy

Pitfalls (...)
 
 
 

Focus Strategy

Pitfalls (...)
 
 
 

Differentiation Strategy

When to apply (...)
 
 
 

Extreme Customer Trust as a Source of Competitive Advantage

Competitive Advantage, CRM, Customer Loyalty, Customer Intimacy (...)
 
 
 

The Key Role of Strategists in Creating Competitive Advantage

Business Strategy, Corporate Strategy, Competitive Advantage, Strategy Education (...)
 
 
 

Knowledge as Competitive Advantage

The New Form of Advantange (...)
 
 
 

Factors to Create a Sustainable Competitive Advantage

Porter's SCA Factors (...)
 
 

Resources - Competitive Advantage

Here you find powerpoint presentations, micro-learning videos and further information sources.


How to Sustain Competitive Advantage?

Business Strategy, Sustaining Competitive Advantage, Sustainable Competitive Advantage, (...)
 

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

Value Chain Management, Quality Management, Innovation, Operational Excellence (...)
 

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

Strategic Management, Information Technology (...)
 

Competitor Analysis

External Strategic Analysis (...)
 

Introduction to Competitive Strategy: The 3 Circle Model

Initial Understanding of Competitive Strategy (...)
 

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

Business Strategy, Value Chain Management (...)
 

Porter: Misconceptions about Strategy and Competitive Advantage

Understanding Strategy and (Sustainable) Competitive Advantage (...)
 

Developing a (Sustainable) Competitive Advantage

Competitive Advantage, Sustainable Competitive Advantage, SCA, CA (...)
 

Competitive Advantage Diagram

Strategy (...)
 

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


Return to Management Hub: Marketing  |  Strategy  |  Supply Chain & Quality


More Management Methods, Models and Theory

Special Interest Group Leader

You here? Sign up for free


 


About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
© 2019 12manage - The Executive Fast Track. V15.2 - Last updated: 7-12-2019. All names ™ of their owners.