ABSTRACT
Michael Porter believed there were three generic competitive strategies that businesses could choose from: cost leadership, differentiation or focus. He suggests that every business needs to select one of these in order to compete in the market place and gain competitive advantage. Cost leadership strategy is based on being the lowest cost producer in the market. Differentiation strategy is based on providing customers with the perception that the products and services offered are noticeably better. Focus strategy concerns selling into a narrow market and therefore creating a ‘niche’ for the organisation. An organisation selects its strategy by considering two aspects of the competitive environment: the source of competitive advantage; and the competitive scope of the target customers. The model is purely descriptive in that it provides three strategic options for strategists to choose between, rather than analysing a given situation and/or informing which strategy is best to select.
