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Once again, thinking on the subject of corporate strategy has provided insights that can clarify the decisions that have to be made

Michael Porter has highlighted the distinction between two fundamental approaches or, as he terms them, “generic strategies”. One of these is to concentrate upon becoming competitive through “cost leadership”, i.e. by
having the lowest costs in the industry (though this does not, of course,
necessarily mean having the lowest selling prices). The other is to concentrate
upon “differentiation”, which means offering the customer superior quality and
a unique package of features. Clearly, no enterprise can afford to ignore either
costs or quality completely. Porter believes, however, that no company can hope
to dominate its field in both cost and differentiation, and that any attempt to do
so will lead to being “stuck in the middle” with neither the most competitive
costs nor superior product features.

Practical examples of the strategic choices to be made are:
– offering state-of-the-art technologically advanced products not available
from other firms or available from very few (differentiation), and regularly
abandoning these products and moving on when the technology becomes
common and prices start to drop;
– providing service to clients with speed and reliability superior to that offered
by competitors (a further form of differentiation);
– selling high-quality and particularly reliable products for relatively high
prices, and/or products tailored to the particular needs of clients who find
standard products unsatisfactory (differentiation again);
– selling standard products of acceptable but not particularly high quality at
very competitive prices (cost leadership).



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