Dr. Ahmad Javed Askarzai
Vienna University of Austria
• 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
• Cost Leadership Strategy
• Differentiation Strategy
• Focus Strategy
• Stuck In The Middle
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.
• 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
• - 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,
• To be different, is what organisations strive for;
companies and product ranges that appeal to
customers and "stand out from the crowd" have a
• With a differentiation strategy the business develops
product or service features which are different from
competitors and appeal to customers including
functionality, customer support and product quality.
• 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.
• 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
• A focus strategy is known as a narrow scope strategy
because the business is focusing on a narrow
(speciﬁc) segment of the market.
• Roll Royce, Bentley and Saga a UK company
catering for the needs of people over the age of 50.
Are You "Stuck In The
• Some businesses will attempt to adopt all three
strategies; cost leadership, differentiation and niche
• 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
• 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.
• 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.
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