Competitive Advantage by Michael Porter
Michael Porter was born in 1947. He is the Lawrence University Professor at Harvard Business School. His work is recognized in many corporations, governments and academic circle globally. According to Michael Porter there are two essential types of competitive advantage namely cost and differentiation advantage.
When the firm is able to deliver benefits as competitors at a quite lower price, this type of competitive advantage is known as cost advantage. When the benefits can be delivered that exceed those of competing products, this is known as differentiation advantage. A competitive advantage will enable the firm to create comparatively higher value for its customers and higher profits for themselves. Now, the two basic types when combine with other scope of activities of the firm lead to three strategies that will help us in achieving an above average performance in the industry. They are differentiation, focus and cost leadership.
Differentiation: in this strategy the firm seeks to be unparallel in the industry. The organization selects some attributes that buyers perceive as important and uniquely position it self to meet those demands and needs.
Focus: this generic strategy rests on the scope of competition. This strategy of focus has two variants, they are:
- Cost focus: the cost advantage is sought out in target segment by the firm and the differentiation focus; a firm can seek in its target segment. These two variants of focus strategy depend on the differences between target segment and various other segments present in the industry.
- Cost Leadership: In this strategy, a firm wants to become the low cost producer. A low cost producer must exploit and find all the sources of cost advantage. A firm that can achieve cost leadership can attain an above average performance in its industry if it can command prices near the industry average.
Written by: Matt
We also suggest this relevant article if you have time: Management by Objectives by Peter Drucker
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