Porter suggested two overall business strategies that could be followed in order to gain competitive advantage: Porter argued that differentiation and low cost are effective strategies for firms to gain competitive advantage
what is a competitive advantage?
An advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices
Strategic Positioning with a Low-Cost Strategy
If selling prices are broadly similar, the lowest-cost operator will enjoy the highest profits
Little product differentiation
• High levels of productivity & efficiency • High capacity utilisation • Large scale = economies of scale • Use bargaining power to negotiate (or demand) lowest prices from suppliers • Lean production methods and low-cost culture • Access to the widest and most important distribution channels
Strategic Positioning through Differentiation
• Superior product quality (features, benefits, durability, reliability) • Branding (strong customer recognition & desire; brand loyalty) • Wide distribution across all major channels (i.e. the product or brand is an essential item to be stocked by retailers) • Sustained promotion - often dominated by advertising, sponsorship etc
