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
- Cost Leadership (low cost)
- Differentiation
Both can be more broadly approached or narrow, which results in the third viable competitive strategy:
- 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 -
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Sustained Competitive Advantage
Industry Competitiveness...
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Not Generic Strategies...:
Pseudo Strategies!...
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Differentiation and 5 Forces
Influence of Differentiation...
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Low-Cost Strategy
Pitfalls...
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Focus Strategy
Pitfalls...
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Differentiation Strategy
When to apply...
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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...
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Factors to Create a Sustainable Competitive Advantage
Porter's SCA Factors...
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How to Sustain Competitive Advantage?
Business Strategy, Sustaining Competitive Advantage, Sustainable Competitive Advantage,...
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The Role of Value Chain Functions, Quality Management and Innovation in Competitive Advantage
Value Chain Management, Quality Management, Innovation, Operational Excellence...
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How Businesses can Use Information Technology (IT) in Strategic Ways
Strategic Management, Information Technology...
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Competitor Analysis
External Strategic Analysis...
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Introduction to Competitive Strategy: The 3 Circle Model
Initial Understanding of Competitive Strategy...
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Porter's Industrial Organization Versus Barney's Resource Based View
Business Strategy, Value Chain Management...
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Porter: Misconceptions about Strategy and Competitive Advantage
Understanding Strategy and (Sustainable) Competitive Advantage...
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Developing a (Sustainable) Competitive Advantage
Competitive Advantage, Sustainable Competitive Advantage, SCA, CA...
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Competitive Advantage Diagram
Strategy...
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News about Competitive Porter
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News about Competitive Advantage
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Videos about Competitive Porter
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Videos about Competitive Advantage
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Presentations about Competitive Porter
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Presentations about Competitive Advantage
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Books about Competitive Porter
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Books about Competitive Advantage
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More about Competitive Porter
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More about Competitive Advantage
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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
Return to Management Hub: Marketing
| Strategy |
Supply Chain & Quality
More Management Methods, Models and Theory
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Special Interest Group Leader
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