Generic strategies

Diagram

NarrowCompetitive scopeBroad

Cost leadership

Broad scope; advantage from the lowest cost in the industry.

Differentiation

Broad scope; customers pay more for distinct value.

Cost focus

Narrow segment; lowest cost within it.

Differentiation focus

Narrow segment; distinct value for a specific group.

Lower costSource of advantageDifferentiation

Pitfalls

Pitfall

Trying to do both and getting 'stuck in the middle'. Porter (1980, ch. 2) argues that a firm that does not choose one direction will perform poorly; treat that as a hypothesis to test in your own industry, not a law.

Sources

References

Listed A–Z by author surname, Harvard style. A source with a DOI links to https://doi.org/…; one without links to its page or says plainly that it has no DOI.

Porter, M.E. (1980) Competitive strategy: techniques for analyzing industries and competitors. New York: Free Press.No DOICited in 1 article
Porter, M.E. (1985) Competitive advantage: creating and sustaining superior performance. New York: Free Press.No DOIloc.gov Source page

Backlinks

Five forcesBefore entering or expanding in an industry, how can a business owner tell whether it can stay profitable over time, and which competitive forces squeeze margins most?
Value chainA CEO needs to cut cost or raise prices but cannot tell which activities create value and which only burn money: how should the firm's activities be split up and compared with rivals'?
VRIO frameworkWhen leaders plan to invest in an internal resource or capability, is it valuable, rare and hard to imitate enough for lasting advantage, and is the firm organised to exploit it?
Value disciplinesWhen setting strategy for a firm trying to excel at everything, should the CEO choose to lead on operational excellence, product leadership or customer intimacy?
VRIN attributesWhen setting long-term strategy, which of the firm's resources are valuable, rare, hard to imitate and non-substitutable enough to give the leadership team a sustained competitive advantage?

Diagram