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:

3. 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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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 Competitive Advantage, Sustainable Competitive Advantage, SCA, CA This presentation outlines how to develop a business model for sustainable competitive advantage. The presentation inclu (...) Competitive Advantage Diagram Strategy Download and edit this 12manage PowerPoint graphic for limited personal, educational and business use. Republishing in (...)

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