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Porter's generic strategies


For an organisation to obtain a sustainable competitive advantage, Michael Porter suggested that they should follow either one of three 'generic' strategies.

These ideas were developed by Michael Porter in 1980 in his book Competitive Strategy: Techniques for Analysing Industries and Competitors. He argued that the strengths of a firm basically fall into one of two categories:

  1. Cost advantageor
  2. Differentiation

He then looked at applying these strengths in either a broad scope (looking at the whole market) or a narrow scope (looking at a particular segment of the market). As a result of this approach, he came up with three 'generic strategies'.

They are called generic strategies because they are not firm or industry dependent. The diagram below illustrates these different strategies.

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The skill required is to choose the right strategy at the right time. These generic strategies are driven by five competitive forces that the organisation has to take into account (see unit 4.2 in the marketing topic).

Porter warned against firms becoming 'stuck in the middle', where they feel threatened on all fronts by new competitors and respond by trying to compete on costs, image and quality rather than selecting the strategy most appropriate for the business. Unless the business focuses on the areas where it has a competitive advantage, customers will become confused about what the business is and what it represents.


Without looking at the diagram above, can you match the generic strategies with their market position?


Porter's generic strategies

Can you match each generic strategy with its market position?

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