1. Low-cost strategy
Reference: ERP Resource Planning
Low-cost strategies – Introduction
Low cost strategy is one of three generic strategies (differentiation strategy and focus
strategy). The enterprise decides to implement low pricing to motivate demand and gain
market share. Companies usually use this where the product has little to no competitive
advantage.
Sources of Cost Advantage Due to the Different Industrial Structure
This may include the pursuit of economies of scale, proprietary technology, preferential
treatment of the raw materials, and other factors. For example, the television, the leading
position on the acquisition costs need to have sufficient size CRT production facilities,
low-cost design, automated assembly, and is conducive to sharing the development cost
of the global sales volume. While the security services and the cost advantage requires
extremely low management costs, a steady stream of cheap labor and high efficiency due
to large turnovers of personnel training program, the pursuit of the status of low-cost
manufacturers not only need to move down the learning curve, they must also find and
explore all sources of cost advantage.
If a business is able to achieve and maintain comprehensive cost management, then it can
make the price equal to or close to the average price level of the industry. When the
leading enterprise cost their price equal to or less than its competitors, its low cost
position can be transformed into high-yield. However, occupying a leading position in
terms of costs, companies can not ignore the basis of the unique product and cost leader.
The company’s products in the customer’s eyes will not be seen as comparable with other
competing vendors’ products, and may be accepted when forced to cut prices so much
lower than the level of their competitors to increase sales. This may offset the benefits of
its favorable cost position. Texas Instruments (Texas Instruments Watch Industry) and
Northwest Airlines (Northwest Airlines, Air transport) are two low-cost manufacturers
caught in this dilemma. The former due to their inability to overcome the disadvantages
of its unique products, outside the watch industry; the latter due to the timely detection of
problems and started efforts to improve marketing, passenger services and the services
provided by travel agencies, while furthering its services to keep pace with competitors.
A cost leader in enterprise is dependent on its leading position in order to gain a
competitive advantage. Being above-average, the product must be compared to its
competitors based on position of equal or similar value. Decrease the value of the product
cost based on approximate means necessary to achieve satisfactory market share, while
not writing off the value of the cost advantage of leading companies. Thus, cost-leading
companies can earn above-average income.

2. Cost leadership strategy generally requires an enterprise to be the cost leader, as opposed
to one of a number of vendors competing for this position. Many manufacturers have
failed to recognize this, which is a big mistake in strategy. Aspiring to be the cost leader
in the manufacturing industry is an intense competition because every one percentage
point of market share is considered essential. Unless there is a major technological
change, an enterprise should be able to completely change its cost position; otherwise, the
small cost leadership relies on a strategy that is pre-emptive.
A successful low-cost strategy depends on the enterprise’s ability to implement the
strategic skills on a daily basis. The cost does not automatically or accidentally drop. It is
the result of hard work, perseverance, and attention to costing. Therefore, to improve the
relative cost position, there is not so much need to make major changes in strategy, as the
need to manage attention and execution.
The Main Types of Low-Cost Strategy
Depending on the cost advantage, the low-cost strategy is summarized by Zhang Tan as
follows:
(1) To simplify the product-type is a low-cost strategy; it is simplistic, and the abolition
of all upcoming products or services is added to the pattern.
(2) Improve the design of low-cost strategies
(3) Material-saving low-cost strategy
(4) The cost of labor; reduce the type of low-cost strategy
(5) Innovation and automation low-cost strategy
Applicable Conditions of Organizational Low-Cost Strategy
(1) The existing competition between enterprises; pricing is very competitive
(2) The products of the enterprises in which the industry is a standardization or
homogenization
(3) The way of product differentiation is small
(4) The majority of customers use the product
(5) Low switching costs for consumers
(6) Consumer price reduction negotiations
Low-Cost Strategy – with Conditions

3. When implementing low cost strategy, the enterprise must also have the following skills
and resources:
(1) Way of continuing capital investment and access to capital
(2) Production and processing skills
(3) Serious labor supervision
(4) Design easy to manufacture products
(5) Low-cost distribution system
Low-Cost Strategy Benefits
(1) Withstand the confrontation of the existing competitors
(2) To resist the bargaining power of buyers
(3) More flexibility in the higher price of the supplier
(4) Formation of barriers to enter
(5) Establish alternative competitive advantage
Low-Cost Strategy Risks
(1) Price reduction caused by excessive profit margins
(2) New entrants are likely to come from behind
(3) Loss of ability to foresee changes in the market
(4) Technological changes reduce the effectiveness of corporate resources
(5) Vulnerable to the impact of the external environment
Low-cost strategies – Common Errors
From a strategic perspective, many companies miss fully understanding their cost
behavior, and are then unable to take advantage of the opportunity to improve its relative
cost position. Enterprises are guilty of some of the most common mistakes which include:
(1) Most managers only think of the cost of production activities

4. Mention the “cost”, and most managers will naturally think of the production. However,
total cost, if not most of, forms a large part of the produce marketing, marketing, service,
technology development and infrastructure activities. Most managers think only of the
cost of production activities, and cost analysis often attracts little attention to review the
entire value chain. This often comes to relatively simple steps that can greatly reduce
costs. For example, in recent years, the cost of computer and computer-aided design
progress on the research work is convincing.
(2) Ignoring procurement
Many companies are preoccupied with reducing labor costs of purchased inputs that
procurement has almost been entirely ignored. They tend to purchase as a secondary
support function, and management usually pays no attention. Analysis of procurement
departments are often too focused on the purchase price of key raw materials. Companies
often allow reduction of costs when neither have the expertise nor the enthusiasm to
purchase necessities. For many businesses, the procurement methods’ little changes will
produce significant benefits in cost.
(3) Ignore indirect or small-scale activities
Reducing the cost of planning is usually focused on a large scale. The cost of activities
and (or) direct activities such as component production and assembly, is a small part of
the total cost of activities. Indirect activities such as maintenance and routine costs are
often ignored.
(4) Lack of awareness on the cost drivers
Businesses often misjudged their cost drivers. For example, the largest national market
share may have the lowest cost, but may incorrectly be thought of as a national market
share to promote cost. Cost leadership, however, may actually be the region from
businesses operated by the larger regional market share. Companies do not understand
that the source of its cost advantage may encourage attempts to reduce costs in order to
improve the national market share. As a result, it may be weakened by a regional focus to
destroy their cost position. It may also focus its defense strategy on the national
competitors, while ignoring the greater threat caused by strong regional competitors.
(5) Inability to use contact
Few companies recognize the impact of cost between the relationship with suppliers and
a variety of activities, such as quality assurance, inspection and services. The ability to
use contact is fundamental to the success of many Japanese companies. An instance is
Panasonic (Matsushita) and Canon’s awareness and use of contact, even if their policies
are in contradiction with the traditional production and procurement methods. Not
recognizing the contact can lead to several errors, such as requiring each department to

5. reduce fees in the same proportion, regardless if some departments need to improve the
cost so that it may reduce the total expense.
(6) Reduce the cost of the conflicting
Companies often attempt to contradict each other in various ways to reduce costs. They
try to increase market share and benefit from economies of scale and diversification
model to offset the economies of scale. Factories are located close to the customers in
order to save transportation costs, but also stress that the development of new products
will reduce burden. The cost drivers are sometimes contrary; companies must take
seriously the trade-offs between them.
(7) Unintentional cross-subsidization
When enterprises fail to recognize the existence of cost performance for each different
part of the market, they often do not know not to get involved in cross-subsidization. The
traditional accounting system rarely measures these products, and the cost difference
between customers, sales channels, or geographic regions. Companies may on certain
price too high, but given consideration of the price subsidies on other products or
customers. White wine for example, has low variable requirements, therefore will need to
be a barrel cheaper than red wine. Wine makers develop the same price for red and white
wines based on the average cost and low-cost white wine prices to subsidize the price of
red wine. Competitors can take advantage of unintentional cross-subsidization, and often
those who know the value of cost advantage will undercut in order to improve their
market position.
(8) Value-added considerations
The efforts made for lower cost is often to secure added value to improve, rather than
seeking ways to reconfigure the existing chain. Value-added improvement may reach the
point of diminishing returns, and reconfigure the value chain will be able to access a new
stage of the cost.
(9) Damage the image of the unique
Reducing costs for customers, in consideration of unique characteristics of the product
for customers, may impair its distinctive image. Although this may be strategically
desirable, this should be a result of conscious choices. Efforts to reduce costs should
focus primarily on the benefits of the enterprise’s unique activities. In addition, the
leading provider need not spend a lot of money to improve efficiency, create a unique
image and work hard to do so.
Product differentiation
From Wikipedia, the free encyclopedia

6. Jump to: navigation, search
It has been suggested that this article or section be merged with Differentiation
(economics). (Discuss) Proposed since January 2012.
In economics and marketing, product differentiation (also known simply as
"differentiation") is the process of distinguishing a product or offering from others, to
make it more attractive to a particular target market. This involves differentiating it from
competitors' products as well as a firm's own product offerings. The concept was
proposed by Edward Chamberlin in his 1933 Theory of Monopolistic Competition.
Contents
• 1 Rationale
• 2 Ethical concerns
• 3 See also
• 4 References
• 5 External links
Rationale
Differentiation can be a source of competitive advantage. Although research in a niche
market may result in changing a product in order to improve differentiation, the changes
themselves are not differentiation. Marketing or product differentiation is the process of
describing the differences between products or services, or the resulting list of
differences. This is done in order to demonstrate the unique aspects of a firm's product
and create a sense of value. Marketing textbooks are firm on the point that any
differentiation must be valued by buyers (e.g.[1]). The term unique selling proposition
refers to advertising to communicate a product's differentiation.[2]
In economics, successful product differentiation leads to monopolistic competition and is
inconsistent with the conditions for perfect competition, which include the requirement
that the products of competing firms should be perfect substitutes. There are three types
of product differentiation: 1. Simple: based on a variety of characteristics 2. Horizontal :
based on a single characteristic but consumers are not clear on quality 3. Vertical : based
on a single characteristic and consumers are clear on its quality [3]
The brand differences are usually minor; they can be merely a difference in packaging or
an advertising theme. The physical product need not change, but it could. Differentiation
is due to buyers perceiving a difference; hence, causes of differentiation may be
functional aspects of the product or service, how it is distributed and marketed, or who
buys it. The major sources of product differentiation are as follows.
• Differences in quality which are usually accompanied by differences in price
• Differences in functional features or design

7. • Ignorance of buyers regarding the essential characteristics and qualities of goods
they are purchasing
• Sales promotion activities of sellers and, in particular, advertising
• Differences in availability (e.g. timing and location).
The objective of differentiation is to develop a position that potential customers see as
unique. The term is used frequently when dealing with freemium business models, in
which businesses market a free and paid version of a given product. Given they target a
same group of customers, it is imperative that free and paid versions be effectively
differentiated.
Differentiation primarily impacts performance through reducing directness of
competition: As the product becomes more different, categorization becomes more
difficult and hence draws fewer comparisons with its competition. A successful product
differentiation strategy will move your product from competing based primarily on price
to competing on non-price factors (such as product characteristics, distribution strategy,
or promotional variables).
Most people would say that the implication of differentiation is the possibility of
charging a price premium; however, this is a gross simplification. If customers value the
firm's offer, they will be less sensitive to aspects of competing offers; price may not be
one of these aspects. Differentiation makes customers in a given segment have a lower
sensitivity to other features (non-price) of the product.[4]
Ethical concerns
Some product differentiation approaches raise ethical concerns. These include techniques
based on customers' ignorance, rebranding existing products to sell them as new or
introducing anti-features that create artificial limitations to otherwise fully functional
goods.
GENERIC (COMPETITIVE)
STRATEGIES
MICHAEL PORTER
Introduction
Michael Porter suggested that businesses can secure a sustainable competitive advantage
by adopting one of three generic strategies. He also identified a fourth strategy "middle of
the road" strategy, which although adopted by some businesses, is unlikely to create a
competitive advantage. Each of the four strategies are discussed below.

8. Cost Leadership Strategy
This strategy involves the organisation aiming to be the lowest cost producer and/or
distributor within their industry. The organisation aims to drive cost down for all
production elements from the sourcing of materials, to labour costs. To achieve cost
leadership a business will usually need large scale production so that they can benefit
from "economies of scale". Large scale production means that the business will need to
appeal to a broad part of the market. For this reason a cost leadership strategy is a broad
scope strategy. A cost leadership business can create a competitive advantage:
- by reducing production costs and therefore increasing the amount of profit made on
each sale as the business believes that its brand can command a premium price or
- by reducing production costs and passing on the cost saving to customers in the hope
that it will increase sales and market share
Low cost producers include Easy Group, Ryan Air, and Walmart.
Differentiation Strategy
To be different, is what organisations strive for; companies and product ranges that
appeal to customers and "stand out from the crowd" have a competitive advantage. Porter
asserts that businesses can stand out from their competitors by developing a
differentiation strategy. With a differentiation strategy the business develops product or
service features which are different from competitors and appeal to customers including

9. functionality, customer support and product quality. For example Brompton folding
bicycles when folded are more compact than other folding bikes. Folding bikes are
usually purchased by people with limited storage space at home or on the move; a
compact bike is therefore a valued product feature and differentiates Brompton bicycles
from other folding bicycles. A differentiation strategy is known as a broad scope strategy
because the business is hoping that their business differentiation strategy, will appeal to a
broad section of the market. New concepts which allow for differentiation can be
protected through patents and other intellectual property rights, however patents have a
certain life span and organisation always face the danger that their idea which gives them
a competitive advantage will be copied in one form or another.
Focus (Niche) Strategy
Under a focus strategy a business focuses its effort on one particular segment of the
market and aims to become well known for providing products/services for that segment.
They form a competitive advantage by catering for the specific needs and wants of their
niche market. Examples include Roll Royce, Bentley and Saga a UK company catering
for the needs of people over the age of 50. Once a firm has decided which market
segment they will aim their products at, Porter said they have the option to pursue a cost
leadership strategy or a differentiation strategy to suit that segment. A focus strategy is
known as a narrow scope strategy because the business is focusing on a narrow (specific)
segment of the market.
Are You "Stuck In The Middle"
Some businesses will attempt to adopt all three strategies; cost leadership, differentiation
and niche (focus). A business adopting all three strategies is known as "stuck in the
middle". They have no clear business strategy and are attempting to be everything to
everyone. This is likely to increase running costs and cause confusion, as it is difficult to
please all sectors of the market. Middle of the road businesses usually do the worst in
their industry because they are not concentrating on one business strength.
Conclusion
To create a competitive advantage businesses should review their strengths and pick the
most appropriate strategy cost leadership, differentiation or focus. Although each of these
strategies are known as generic strategies (because they can be applied to every industry)
they will not suit every business. For example small businesses may find it difficult to
generate the economies of scale needed for broad scope cost leadership but a smaller
customer base may enable them to offer a personalized service through a narrow scope
focus strategy. Conversely a larger business may not be able to generate sufficient
revenue through a focus strategy but be able to pursue aggressive broad scope cost
leadership because of the size of the business. Whatever strategy a business decides to
adopt they should make sure that it isn't middle of the road because one business can not
do everything well.

10. Clowns to the left of me,
Jokers to the right, here I am,
Stuck in the middle with you.
– “Stuck in the Middle with You” a song by Stealers Wheel
The “middle” seems to be what every executive wants to avoid these days. There is
ample research on business strategy that suggests the middle is to be avoided for fear of
being stuck in it. The conventional view is to see the “middle” as the problem. I see
things slightly differently: the problem is not the middle; it is allowing your firm to get
stuck at all. How you see the problem has big implications for taking action.
Closer to home, a recent article, “Trouble in the Middle,” which appeared recently in The
Economist, suggested that time may be running out for business schools that “aren’t quite
elite.” The Economist uses its rankings to segment the market (readers of this blog will be
familiar with my reservations about rankings.) The author argued that the value
proposition of mid-ranked schools has worsened and presages a “shakeout…which could
be nasty.” Thus, the problem of the middle is relevant beyond the boundaries of the for-
profit sector.
Michael Porter of Harvard Business School originally discussed the problem of “stuck in
the middle.” He said that the profitability of firms depends not only on the typical rates of
return in an industry. It depends more importantly on the firm’s position and competitive
advantage in that industry. And he argued that competitive advantage derives from one of
two strategies: cost leadership or differentiation of products or services. Across most
industries you can find firms and products that aim for advantage based on either cost or
differentiation.
The problem, Porter said, was in trying to do both and thus doing neither very well. He
seemed to be saying, “find what you are good at and stick to it.” This focus on
competencies is very sound. Porter wrote, “The firm stuck in the middle is almost
guaranteed low profitability. It either loses the high-volume customers who demand low
prices or must bid away its profits to get this business away from low-cost firms. Yet it
also loses high-margin businesses — the cream — to the firms who are focused on high-
margin targets or have achieved differentiation overall. The firm stuck in the middle also
probably suffers from a blurred corporate culture and a conflicting set of organizational
arrangements and motivation system.” (Competitive Strategy, p. 41-42)
The following table gives some examples from various industries. The firms in “the
middle” have felt or are feeling a severe contraction.
Differentiators The Middle Cost Leaders
Nordstrom, Banana K-Mart, Sears,
Retailing WalMart, Target
Republic, J. Crew Woolworth

11. Beer Microbrewers Pabst, Blatz SAB Miller, INBEV
SouthWest, Peoples
Airlines Singapore, Cathay Pacific American
Express
Commodity
Cellphones Apple, Google Nokia
Manufacturers
Japanese Auto
Autos BMW, Mercedes Chrysler, GM
Manufacturers
Soft Drinks Coke, PepsiCo Dr. Pepper Private labels
Orange Juice Tropicana, Minute Maid 100 small brands Private labels
White Goods Sub-Zero, Viking Maytag, Whirlpool Korean Manufacturers
Motor
Aprilia Piaggio Honda, Yamaha
Scooters
American Airlines recently filed for bankruptcy. Chrysler and GM required a government
bailout in 2009. Piaggio acquired its way into the differentiated end of the market by
buying Aprilia. Dr. Pepper was acquired by Cadbury Schweppes. As these examples
seem to suggest, the middle is not a place to become stuck.
Porter’s characterization eventually spawned opposition, arguing that the middle may not
be all that bad or that it may be entirely sensible for managers to test the middle for the
sake of discovering possible new segments of demand. After all, demand can be defined
on numerous dimensions, well beyond cost and difference, such as convenience, style,
and location. Then too, there is the pesky problem that consumer demand keeps changing
over time, which necessitates constant experimentation by firms to discover where the
new demand is. Today’s single-minded focus on cost or difference may be tomorrow’s
business graveyard.
I was a student of Porter’s in the 1970’s when his iconic treatise, Competitive Strategy,
hit the business world. I recall that his readers quickly absorbed his thinking about
competitive positioning and generic strategies. But it struck me that they often ignored
another aspect of Porter’s work, the dynamic “jockeying for position” among firms.
Firms and markets are not static. They continually change as firms try to best one
another. And periodically, new technologies come along that completely upset the

12. competitive field. Another great economist, Joseph Schumpeter, described the
competitive turbulence of capitalism as the “gale of creative destruction.”
Being stuck in an unattractive business without a viable exit is one of the worst situations
for a firm. For instance, a diversified firm that I studied owned a coal tar refinery that had
operated for over 100 years. The facility was inherited in an acquisition many years
earlier. The plant was antiquated and inefficient. Furthermore, the market had turned
highly competitive, making the refinery very unprofitable. The firm wanted to exit the
business, but couldn’t, because doing so would trigger environmental clean-up
obligations from chemical leakage over the years. Eventually, the company appointed a
new manager who immediately opened negotiations with the environmental authorities,
and eventually negotiated a “workout” program in which the refinery would be closed
immediately and environmental remediation would be conducted over time, rather than
all at once. This was an enormous success for the company and the manager, who
recognized that not only was the company stuck, but so were the environmental
authorities, who had been stymied by the inaction of the company.
Nuclear power plants, petrochemical plants, and many manufacturing plants face exit
costs that can ruin the economics of a business as it approaches its end. Another example
of being “stuck” is encountered by a minority investor in an underperforming private firm
—even if a minority investor wanted to exit, his or her investment could be stranded if
the securities are illiquid. Such would be the case until the majority investor decides to
sell the entire firm. An airline can become stuck by virtue of an aging fleet of airplanes,
uneconomic union contracts, and/or landing rights that don’t fit the more profitable
segments of demand. Retailers can become stuck by virtue of stores planted in
neighborhoods with the wrong demographic trends. A technology company can become
stuck because of a commitment to obsolete technology.
Irreversible strategic positions entail commitments that expose the firm to risks. In
contrast, flexible positions can be altered as conditions change. You can think of
flexibility as a call option on an alternative strategy–it is enabled, for instance, by holding
excess manufacturing capacity, excess inventory, or excess cash. Management techniques
such as lean manufacturing grant strategic flexibility.
An illustration of the creation of flexibility is apparent in the trend toward
“modularization” of manufacturing. Complex business processes and products can be
organized into sub-units, called “modules,” that permit specialization, encourage greater
innovation, and promote efficiency. The innards of any personal computer and the
success of Dell Computer illustrate the fruits of modularity: architectural flexibility pays.
Too often, MBA students and executives think that “risk management” means the active
avoidance of risks. But societies need business managers to take sensible risks—to seek
risk—because that’s where opportunities lie. The best executives understand that the
great sin has less to do with risk-taking (such as exploring the “middle” of a market) and
instead has to do with failing to develop flexibility—such as a sensible “Plan B”—if the
dice turn against you.

13. I agree with The Economist that the field of b-schools is in for some turbulence. And if
other industries are any guide, the turbulence could hit the middle hardest. But The
Economist says little about the possible ingenuity of leaders of those schools or of the
agility those schools might show. The next few years will be very interesting. As Yogi
Berra said, “It ain’t over ‘till it’s over.”
Stealers Wheel characterize “stuck in the middle” as being caught between clowns and
jokers. These may be weak competitors to your firm and therefore may present a great
opportunity to serve markets and create value. If so, is the middle that bad? Yes it is, if
you are stuck in some important way. The inability to respond flexibly and appropriately
to new competitive conditions is the grave threat.
Stuck In The Middle Of Porter’s Generic
Strategies
by Paul Simister on February 14, 2011
Harvard professor and world famous business strategist Michael Porter has a simple view
to business and how you can generate superior returns from your business – the generic
strategies - but you can get stuck in the middle, not one thing or the other.
These ideas were introduced in the book Competitive Strategy by Michael Porter.
The Keys To Successful Competitive Strategy
Either:
1. Work in a business which is an attractive industry – this is a business that is well
positioned against the five competitive forces that Porter identified (threat of new
entrants, threat of substitutes, buyer power, supplier power and intensity of
competition).
.
2. Have a competitive advantage.
Michael Porter & The Generic Strategies
And when it comes to competitive advantage, Porter was equally simple because your
competitive advantage can either be:
1. From being the lowest cost operator supplier acceptable goods and services at a
reasonable price (and having the ability to beat anyone else on price if necessary)
.
2. From winning buyer preferences based on providing a product or service which is
differentiated.

14. Those two cost advantages can either be applied to the broad market or to narrow focused
or niched markets.
The Generic Strategies For Competitive Advantage (Competitive Strategy by Michael
Porter)
The Danger Of Being Stuck In The Middle
Unfortunately many businesses fall into the trap of being “stuck in the middle” of the
generic strategies of differentiation and cost leadership.
They don’t offer the high value for money and distinctive product or service that you get
from a differentiated business.
And they don’t offer the low prices that can come from buying from the cost leader.

15. How Businesses Are Caught "Stuck In the Middle"
It happens because the business managers don’t know that they have to choose or think
that they can be both.
Effectively being stuck in the middle comes from trying to compromise and it creates a
muddle.
A muddle for your customers who don’t really know what you stand for or what to expect
from you.
And a muddle for your employee who don’t understand the priorities of their work
performance.
Other Stuck In The Middle Concepts
Stuck in the middle in this strategic context does not mean:
• Being in the middle of a value chain from raw material supplier at one end to end
user of final product at the other. It can be uncomfortable being squeezed by big
suppliers and big buyers but that’s even more reason to follow a cost leadership or
differentiation strategy.
.
• Nor does it mean being stuck in mid market between the premium priced luxury
products and the low priced economy brands although that can also be
uncomfortable if it’s not clear what your business stands for. This mid market
position is sometimes combined with Porter’s stuck in the middle concept but it is
a big simplification of what he’s trying to say. There’s is no reason why a
business can’t have a very distinct and differentiated product offering and charge
mid market prices for example in cars, think of the Mazda MX5 sports car.
How A Business Gets Stuck In The Middle
A stuck in the middle position happens when a business designed to be low cost starts
adding little extra frills which don’t add a corresponding amount to the customer value of
a product.
The business suffers the cost, the customer doesn’t get the benefit.
Or when a differentiated business comes under pressure on prices – perhaps there has
been a market disruption from new technology or an ultra low priced competitor from
overseas – and starts cutting costs in areas which damage the differentiation advantage.

16. What To Do If Your Business Is Stuck In the Middle
If you think that your business is stuck in the middle – or heading in that direction – then
you need to get to grips with your business strategy.
You need to decide what your business is and isn’t.
You need to decide who your business will sell to and who it won’t.
You need to decide what your business will sell and what it won’t.
Strategy is about making wise choices and then having the courage and conviction to
follow through and commit to turning words and ideas into action.
The Role Of The Value Chain In Creating Competitive Advantage
In his follow up book, Competitive Advantage, Michael Porter introduced the concept of
value chain analysis to help you to analyse, understand and create competitive advantage
so that a business isn’t stuck in the middle.
The value chain is an important technique which helps you to focus on advantage based
on differentiation or cost leadership.
Paul Simister is a differentiation business coach who helps small business owners in the
UK to profit from differentiating their businesses, being distinctive in the eyes of their
customers and standing out in a crowded marketplace.
You too can move past your profit tipping point by answering the seven big questions of
business success.