The trade-off between cost leadership and differentiation

Essay from the year 2013 in the subject Communications - Public Relations, Advertising, Marketing, Social Media, grade: 1.0, University of Westminster, language: English, abstract: Porter is considered by many as the most influential strategist in the field of business-strategy. His three generic strategies introduced in 1980 has become a dominant paradigm in business policy literature and has had a deep and pervasive influence on the way of thinking in strategy formulation.

The development of a competitive strategy is the search for a favourable competitive position in an industry, aiming to establish a profitable and sustainable competitive advantage over its rivals by choosing activities that are superior in a way that is of value to customers (Porter, 1985; Porter, 1996).

In order to formulate an overall strategy and to understand a firm s environment as well as to achieve a competitive advantage to outperform rivals in the industry, a company has to apply two frameworks: Porter s five forces of suppliers, buyers, potential entrants, substitutes and rivalry is a means to define the sustainability and long-term profitability of one industry versus others and thus help to understand the industry attractiveness. The three generic strategies namely cost leadership, differentiation and focus strategy as the second framework provide the context for the actions to be taken into account to achieve a superior performance. Hence, they should be an essential component in any firm s strategic plan (Porter, 1980; Porter, 1985; Porter, 1996).