ArticlePDF Available


In this article which is based on a marketing analysis of Michael Porter's definition of competitive strategies, the confusion present in marketing and strategic management texts as to the definitions of the three strategies of low cost, differentiation and focus is noted. The idea that using price to differentiate means a firm is using a low cost strategy is dismissed and the value of a definition of focus strategy as merely some degree of extreme differentiation is questioned. New definitions of the three strategies are proposed which are based upon the idea that firms react to, and take actions which influence, the structure of the market in which they operate. They influence market structure through determining the market's proximity level -the minimum level of marketplace performance which a firm must reach in order to compete across the broad marketplace. If a firm has the ability to reach this level and go further to excel in the provision of one or more benefits, it can implement a differentiation strategy. Alternatively, it can attempt to lift the market's proximity level or partake in imitative activity, which reduces the potential bases for differentiation in the market, a low cost strategy (only sensible for the firm with the lowest costs of production). If a firm lacks the ability to reach the proximity level, it must seek segments which do not require reaching proximity in order to serve them, a focus strategy.
he three marketing strategies, cost
leadership, differentiation and focus,
having so far been misrepresented, are
given more precise meaning.
Byron Sharp
Marketing Intelligence & Planning, Vol. 9 No. 1, 1991, pp 4-10,
© MCB University Press, 0263-4503
In 1980 Michael Porter's
Techniques for
Analysing Industries
was published[1]. The
result of research on industrial economics Porter examined
why certain industries had higher average profit levels than
others and why certain firms within each industry earned
profits above that industry average. He developed a theory
of competitive pressure which determined the profitability
of firms in an industry and he categorised the activities of
firms who earned above-average profits in their respective
industries as following three generic stratgies. Porter formu-
lated a piece of marketing theory, his analysis of industry
structure was certainly economic work, but its outcome
competitive strategy
is theory which describes marketing
decisions, a fact which was quickly appreciated by marketing
academics and practitioners worldwide.
It appears, however, that those academics and practitioners
made no real attempt to apply critique and integrate Porter's
work into the existing framework of marketing theory until
relatively recently[2]. Porter was not a marketer, nor did
he ever claim to be. Unfortunately marketing and
management academics took Porter's theory merely as
it was and placed it into the accepted body of marketing
theory. Not surprisingly confusion exists amongst
marketing texts and academics as to the precise definitions
of the three generic competitive strategies and their
implications for marketing decision making. This article
reformulates these definitions from a marketing point of
view in the light of Porter's original assertion that
competitive strategy depends on, and has an effect on,
market structure.
Porter's Competitive Strategies
Porter described competitive strategies as "taking
offensive or defensive actions to create a defendable
position in an industry, to cope successfully with the five
competitive forces and thereby yield a superior return on
investment for the firm"[1]. His research concluded that
"there are three potentially successful generic strategic
approaches to outperforming other firms in an industry:
(1) overall cost leadership
(2) differentiation
(3) focus."
The following discussion of the definitions of each strategy
considers their fit within the framework of modern
marketing theory, so that they are true to Porter's original
findings; that "each generic strategy is a fundamentally
different approach to creating and sustaining a competitive
advantage"[3] (see Figure 1).
The discussion notes that differences between the
strategies of differentiation, low
and focus have been
poorly presented and occasionally misrepresented in
marketing and strategic management texts. In addition,
Porter made several errors in logic with his definition of
the three strategies.
Figure 1. Three
Generic Strategies
scope Narrow
Competitive advantage
Lower cost
Cost leadership
3A. Cost focus
Differentiation Strategy: Surely it is More
than Just Being Different?
The concepts behind the strategy of
always appeared to sit at the very heart of modern
marketing theory and practice. The rise in interest in
marketing this century came as mass marketing practices
were gradually becoming ineffectual. Markets were
becoming increasingly competitive and consumers better
informed; suppliers needed a strategic response to the
fact that buyers were becoming more skilled and choosy.
Porter wrote ' 'In a differentiation strategy, a firm seeks
to be unique in its industry along some dimensions that
are widely valued by
Differentiation can be
achieved through a whole host of features such as better
quality, lower price (or higher price for that matter),
customer service, reputation, greater awareness, greater
availability. The marketing challenge is to identify different
features which will provide meaningful benefit to
consumers (such that a competitive advantage will be
gained). The benefit must be one which the company is
capable of delivering; one that will be difficult for a
competitor to copy or better
it should be a sustainable
advantage) and hopefully one for which customers will pay
a sufficient premium (enough to cover any increased costs
incurred in deliverying this added benefit.
Differentiation has been interpreted by marketing and
strategic management texts as "making the product
appear different'', ensuring that the offering is perceived
by the customer, as unique in some respect. The
inadequacy of this definition is apparent, in that logically
any new offering must be different in some way for
customers to buy it.
Low Cost Strategy: Is it Low Price?
Porter stressed that this strategy should be adopted only
if a firm possesses, or has the ability to gain, the lowest
costs of production within an industry. Hence the effective
adoption of this strategy is available only to one firm in
an industry at one time. By achieving a marketing mix
(including price) with some proximity to the offerings of
other firms this producer will enjoy higher than average
profits through its higher margin. A low cost position
therefore does not automatically encapsulate the tactic of
lowest price and it is hardly the primary aim of this
strategy; although during a price war the low cost producer
starts from an enviable position which may be exploited.
Porter's original definition of proximity has been ignored
by many marketing writers who have associated the low
cost strategy with an attempt to differentiate on price:
The primary focus of the cost leadership strategy is to
compete on price as the major marketing tool[4j.
The low cost company is in the best position to compete
on the basis of
to defend against
war conditions,
use the appeal of lower
and to earn above-average
profits where
competition thrives[5].
Overall Cost Leadership: here a company works hard to
achieve the lowest costs of production and distribution so
that it can price lower than its competitors
Cost leadership emphasizes producing standardized products
at very low per unit costs for many buyers who are
There is either confusion over the terms cost and price,
or a general failure to appreciate the concept of the whole
marketing mix, by implying that using price to differentiate
is different from using any other feature in any other part
of the mix. Most markets have a whole host of different
price, quality and volume offerings (to choose just three
features). Having a lower price with the same quality and
volume as other firms is simply one way of differentiating
your offering. Each element of the mix offers a potential
route to differentiating a firm's offering to the marketplace;
which is different from any other feature. The lowest cost
producer merely has the exclusive ability to go to a lower
price than all other competitors and it is worth noting that
it may have to go substantially below the price of a firm
which is effectively implementing a differentiation strategy,
possibly to the point of
Therefore being the lowest
cost producer does not necessarily translate to a superior
ability to differentiate.
cost leader ... cannot ignore the bases of differentiation.
If its product is not perceived as comparable or acceptable
by buyers, a cost leader will be forced to discount prices
well below competitors' to gain sales. This may nullify the
benefits of its favourable cost position[3].
If the primary focus of
cost strategy is simply to have
the lowest price there is no marketing argument to
consider differentiation and lost cost as different strategies.
In Porter's defence he did not actually write that the aim
of low cost was lowest price
he said that the essential
aim of a firm following a low cost strategy is not to
differentiate through low price, but to achieve a price as
high as competitors, whilst retaining lower costs of
A True Cost Advantage is not Gained from
Differentiating "Downwards"
Here it is worthwhile to distinguish between a true cost
advantage and one which is simply derived from delivering
fewer benefits. A true cost advantage can derive from only
two sources, either having access to cheaper inputs
(including access to patents and expertise) or being more
efficient (having higher process quality)[8]. Savings in cost
through cutting back on the amount of service or features
given to the market does not give a true cost advantage;
it is an avenue available to all firms. For example, in the
retail grocery industry a number of firms have cost
advantages through their lower staff and service levels,
making shoppers pack their own purchases, etc. To
assume these firms have a low cost advantage and are
using it to implement a low cost strategy would be
incorrect. Their provision of less service forces them to
give customers a compensation drop in prices (or at least
a perceived drop) and it enables them to differentiate and
gain a part of the market (note: this usually goes beyond
just the price-conscious segment). Their strategy is
obviously one of differentiation; focus can be ruled out
as it seems that targeting the purely price-conscious
segment does not appear to be viable as even these low
price supermarkets still stock luxury items and high price
brands which are supposedly not bought
this segment,
and a wide cross-section of the population shop at such
retailers. With virtually the same core costs of other
players in the industry they have decided to differentiate
downwards as opposed to upwards. Instead of
extra benefit and hoping it translates to customers being
willing to pay a premium they have cut benefits in order
to cut price (to differentiate themselves). They hope that
in order to retain customers they will not have to drop
price further than the cost savings they make.
Is Low Cost a Strategy?
When Porter wrote that firms following
a low
cost strategy
could not ignore the bases of differentiation, he meant that,
in order to achieve proximity in price, the low cost firm
has to be aware at
times of
elements of the marketing
mix and the value the market places on the benefits they
deliver. A firm implementing a low cost strategy usually
maintains a much greater degree of
orientation (to
control costs and productivity levels) but
cannot ignore
the marketplace and its segments, and the differences
between the benefits valued
the marketplace (the bases
of differentiation).
Can low
cost be considered
separate marketing strategy?
Speed[2] argues that there is no reason to consider low
cost (as Porter defines it) as a separate strategy. This line
of thought maintains that
cost advantage is merely
a facilitator to differentiate, usually on
He notes that
a low cost advantage "does not lead to any increased
benefits to the consumer unless costs lead to lower
prices''. Porter's definition of
cost is quite simply not
a strategy. Porter's research sought
identify firms which
earned profits higher than the industry
The lowest
cost producer was naturally of particular interest. He
identified an operational circumstance which tended to
allow for above-average profits.
A New Definition of Low Cost Strategy
There is an argument for a new definition of a low cost
strategy where there is an essential difference between
the marketplace activities of a firm following a low cost
strategy and a firm following differentiation. A new
definition states that the
aims for the entire
market and does not avoid tactics which push the industry
the commodity
The thought of being precluded
from any part of the market for a
following low cost
is quite foreign. The aim is to exploit in every segment
the extra marketing muscle given by a cost advantage.
Most importantly, the
to remove bases
for differentiation, to reduce the differences between each
segment; whereas firms following differentiation aim to
build or at least preserve such bases.
The vital difference then between the
which follows
low cost and those who follow differentiation and focus
is the way the firm approaches the market. Whether a
firm follows low cost, differentiation or focus strategies
it still has to offer something unique to the customer in
order to gain a sale. The difference between the three
competitive strategies is not just in the way they
differentiate; it has to do with how they try to influence
the nature of
market. The
cost firm has objectives
of proximity, maximum marketshare and reducing the
bases for differentiation. One
of achieving this removal
of bases for differentiation is to lift the standard of
proximity for the industry, thereby
strategy very difficult to implement.
Lifting the Market's Proximity Level
Proximity or parity was defined by Porter as achieving
"an identical product offering
competitors, or
combination of product attributes that is equally preferred
more useful definition is that proximity
is the minimum necessary level and
of benefits which
a firm must provide if it is to compete right across the
market. Hence the proximity level in effect defines the
broad marketplace; for
different proximity levels
distinguish the air travel market from the taxi market.
The proximity level tends to rise over time and can
sometimes rise very quickly with a price or advertising
war or when there is a major technological advance.
Eventually the rise in proximity can lead to a commodity
market, as has been the case
the domestic salt market.
The proximity level has become high enough to satisfy
most comsumers (who ask for free-flowing qualities,
availability, convenient packaging, iodine and low price)
leaving little room for differentiation. Hence each country
tends to have one main marketer of domestic salt with
a number of smaller firms confined to distinct segments
(supplying rock salt, sea salt, etc.).
Low Cost Strategy and the Influence on Market
The strategy of low cost would appear to be of little
consequence in most industries, since only one
at most
can achieve the lowest costs of production necessary to
implement it. Even if there is a firm which is sure of its
cost advantage, it may still decide not to follow a low cost
strategy but follow
differentiation strategy instead (or even
though a firm with a true cost advantage would be
unlikely to want deliberately to limit potential market share).
What is really significant about this strategy is the fact
that low cost behaviour (e.g. copy-cat marketing,
advertising wars, price cutting) is observed in many
businesses (particularly smaller firms) which are unlikely
a cost advantage. It makes no sense for such firms
to concentrate on proximity. Without a cost advantage,
attempts to reduce or remove potential bases for
differentiation (through lifting the standard of the industry's
are not
the firm's interests. Attempting
to reduce the bases for differentiation can be in the
interests of
one firm, the one with lowest
this firm will never lose its ability to outperform others
under these conditions.
It can be inferred that industry profitability is influenced
by the number and ratio of firms following the low cost
strategy, effectively attempting to reduce the industry to
a commodity market. Interestingly, this situation is not
undesirable for the least cost producer, so such a firm
need not discourage other firms from attempting to
implement a low cost strategy. This contradicts Porter's
assertion that the low cost
must discourage actively
or pre-empt other firms from adopting this strategy.
gain a cost lead
"persuade" others
consequences for profitability
long-run industry structure)
can be
as they
have been in the petrochemical industries. Thus cost
leadership is a strategy particularly dependent on
Focus Strategy: Is it Just Super
the third generic competitive strategy identified
by Porter has been defined essentially according to
competitive scope. A firm following a focus strategy
' 'selects a segment or group of segments in the industry
and tailors its strategy to serving them to the exclusion
of others"
The concept of segmentation has become
tool for effective marketing and is included in all basic
Increasingly the concept of target or niche
marketing has been the basis of marketing strategy and
tactics development in recent years. Focus is dependent
on effective use of this technique.
What the actual difference is between this approach and
a differentiation approach seems to have quite naturally
confused marketing writers. Surely the successful
outcome of using one feature (or more) to differentiate
be to capture one part of the market?
"Since differentiation usually implies that the product has
a particular appeal, then the maximum market share is
So what is the difference between the strategies of focus
and differentiation? Are they both simply target marketing?
Is it essentially a matter of degree, of how small is that
part of
market (target segment) to which you appeal?
Uncertainty over these issues has resulted in many
marketing writers taking the approach of
but ignoring
this third strategy.
Some of the blame must also lie with Porter's use of a
matrix (see Figure 1) to illustrate the three strategies
which inherently suggests focus is not really a strategy
in its
own right. The matrix reduces the definition of focus
to a tactic of a firm merely working in one segment,
because a decision to adopt low cost or differentiation still
needs to be made after deciding upon a focus strategy.
New Definitions of Focus Strategy and
Differentiation Strategy
Can focus be redefined or expressed
in a
different manner
so that it can be considered a strategy in its own right?
Porter gave a clue when he discussed the difference
between differentiation and what he referred to as
Focus does involve differentiating but Porter suggested
differentiation strategy used widely valued attributes
only as differentiating factors, whereas focus uses
segment-specific attributes. When examined along with
the concept of proximity, quite robust definitions are
suggested. Differentiation involves gaining proximity to
other producers
the provision of most benefits desired
by the market and then involves differentiating through
exceeding them in the provision of at least one benefit.
superiority in providing this benefit which
translate to consumers being willing to pay a premium.
In many cases to implement differentiation successfully
a firm needs to capture the position associated with
providing this benefit, in all customers minds, e.g. Volvo
owns the position of providing safety.
With this new definition a clear distinction can be made
between the strategic aims and activities of firms following
differentiation and firms following focus. Focus does not
require outperforming all other competitors in the
provision of one (or few) benefit(s); it simply requires
getting the balance of benefits a firm offers to match
perfectly (or meaningfully better than any other offering)
the demands of the customers in one segment. Porter
quite rightly pointed out the difficulties of one firm
attempting to apply the strategy of focus to more than
one segment because of the internal confusion and lack
of direction this has the potential to cause. Some firms
have succeeded, although usually through using separate
business units, which can really be considered as separate
firms, to handle each different segment. A
a focus strategy is concerned with its own one segment
and is not concerned with gaining full proximity.
Heinz launched a reduced calorie soup range in Australia
in the mid-1970s, adopting incorrectly, a differentiation
strategy. They were conscious of gaining proximity and did
so by marketing a full-flavoured range (they have the
technology to remove calories without removing the flavour)
of tinned, condensed soups under the Heinz brand. The
soups were positioned in the usual soup section of the
supermarket and featured traditional varieties (e.g. beef
broth) and standard Heinz advertising (at the time using
rotund English actor Robert Morley). Heinz's market
research indicated that a substantial proportion of the
population were concerned about maintaining or losing
weight; having fewer calories was, it seemed, a base for
differentiation. Heinz gained proximity and excelled in the
provision of this feature. The soup range failed in the
marketplace, while Trim (by a Heinz rival) continued to
earn profits. Trim was a dried sachet packaged soup,
perceived as slightly watery by consumers, and sold only
in the diet section of the supermarket. In the Australian
soup market in the mid-1970s the diet segment was a
distinct segment where few aspects of proximity were
relevant; Heinz failed to appreciate the true nature of the
market to their detriment.
Gaining proximity is a necessary prerequisite to gaining
a large market share in any market (if it were not, the
definition of what constituted that market would obviously
be in error). Full proximity is therefore necessary for both
low cost and differentiation strategies but not for focus.
So what must be recognised is that the successful
implementation of focus depends on the nature of the
market (as do all the competitive strategies). A clear
segment must exist which can be catered for without
having to gain full proximity.
A firm implementing a focus strategy is vulnerable to
changes in the market and consumer demands which may
mean a segment is no longer viable or that the differences
between segments disappear. The chosen segment
therefore must be well defined, which means it will usually
be small, although not necessarily so. Speed[2] presents
the interesting idea of two versions of focus, one where
a distinct segment is targeted (target marketing) and
another where the segment chosen is so small it can only
accommodate one firm (niche marketing).
The difference between a firm following a focus strategy and
one following a differentiation strategy still can appear fine
at times. Both can appear to be targeting the needs of a
specific segment but the orientation of firms following these
strategies should differ. The effect of differentiation can be
to capture one segment (the segment which values highly
the particular benefit they excel in providing); this, how-
ever, reflects clumsy execution of a differentiation strategy.
The Competitive Advantage of Focus Strategy
Lies in Understanding One Segment's Needs
Many firms are tempted to go beyond their chosen segment,
particularly if they have been successful within
it; it
a difficult decision to take deliberately, to limit potential
sales volume. Porter gives the example of how Laker
Airways focused on the price-sensitive segment (always a
difficult segment to cater for at a profit!) and was
exceptionally successful with its no-frills operation in the
North Atlantic market. Over time the temptation to tap into
other segments became too great and Laker began adding
frills and new routes; it blurred its image and no longer
served its segment so well, and eventually went bankrupt.
Porter[l] actually wrote that a firm following a focus strategy
could focus on a market segment or "a segment of the
product line". Having a narrow product line is merely a
feature of the marketing mix used to target a small part
of the total market; the firm is still operating in one market
segment. To concentrate on the narrow product line rather
than the narrow part of
market to which it appeals would
be to have a production orientation. Always dangerous and
myopic, but surely a fatal mistake for a firm following a focus
strategy where much of
strategic competitive advantage
lies in understanding the segment's needs.
Focus can be powerful competitive strategy but it involves
a deliberate sacrifice of potential sales volume. It is a
particularly useful strategy for firms with limited resources;
they often cannot cope with a large market and, more
importantly, they do not have the ability to reach proximity
(let alone go further to excel in providing one benefit which
is meaningful to a large part of the market). A well
implemented focus strategy, though, can provide a premium
in profit margin which covers the higher costs of catering
so well to a segment.
A Fourth Strategy
et al.[6]
quite rightly pointed out that Porter actually
developed a fourth competitive strategy, which is unlike the
others in that it is a strategy for failure. Porter[l] described
this as stuck-in-the-middle, where a firm attempts to
implement more than one strategy and therefore does not
achieve any of the competitive advantages since "each
generic strategy is a fundamentally different approach to
creating and sustaining a competitive advantage". There have
been a number of critiques of this statement (e.g. [10]).
Porter himself has softened his stance to say that low cost
and differentiation are merely "usually inconsistent, because
differentiation is usually costly"[3]. Differentiation and low
cost are not incompatible under Porter's original definitions,
which made no distinction between having lowest costs of
production and implementing a low cost strategy. (For an
example of how this concept has been embraced see
113].) Under the new definitions in this article these two
strategies are clearly at odds.
Peter Wright and A. Parsina[7] cite several examples of
corporations implementing both focus and differentiation
strategies. Since these strategies are not at odds in that
they both respect the Bases for differentiation within the
industry, this is feasible.However, there is
argument which refutes Porter's assertion that separate,
autonomous management is required for divisions
implementing different strategies.
Summary: Each Strategy Reads to, and Tries
to Influence, Market Structure in a Different
This article has examined Porter's competitive strategies
in a marketing context, an exercise which has produced
new definitions of these strategies, definitions in which
the differences between the three competitive strategies
do not depend purely
scope of activity or whether price
is used
differentiate. Instead
it is
argued that competitive
strategy concerns the way
work within, and try to
influence, the nature of the market.
the base of competitive marketing strategy
the concept
of market nature or market structure. Market nature
describes how much a market differs from a commodity
market and the degree of fragmentation in the market.
Market nature is influenced to a significant degree by the
strategies adopted by the firms within the market. The
activities of firms influence market nature through
determining the market's level of proximity. In a broad
sense a market can be defined by its core benefit (e.g.
communication, nutrition, power/energy), for practical
purposes. However, markets or industries are defined by
the current bundle of benefits which a firm must deliver
be considered
industry-wide competitor.
This bundle of benefits and the level to which they must
be supplied are the market's proximity level (similar to but
not to be confused with "key success factors", which are
commonly used to describe factors within
firm necessary
in order to gain proximity, rather than describing the level
of performance in the marketplace).
firm reaches this level of proximity and then exceeds
it in the provision of one (or few) widely appreciated
benefit(s) (e.g. quality, number of features, price, etc.),
then it is implementing a differentiation strategy. The aim
is to gain a sustainable position in the market and earn a
premium for this extra performance, hopefully enough to
offset any additional costs incurred in offering this benefit.
Differentiation strategy depends on viable bases for
firm implementing this strategy
encourages the development of such
firms in an industry will do best if they recognise one
another's respective positions and therefore do not
embark on "copy-cat" behaviour. Firms following a low
cost strategy take the exact opposite approach.
A firm following a low cost strategy like a differentiator
attempts to gain maximum market share. Unlike a
differentiator, it attempts to reduce or remove possible
bases for differentiation, essentially through lifting the level
of proximity which firms must first gain in order to
differentiate. In effect the
undertakes activity
which will help push the industry down the commodity
curve. Logically, a firm should consider attempting this
only if it has the lowest costs of production, but lowest
costs of production
not force
a low
strategy. The term low cost strategy is potentially
misleading; a better name perhaps is proximity or
commodity strategy.
does not have the ability to gain proximity it can
follow a focus strategy. A firm following a focus strategy
attempts to provide the right balance of benefits (the right
marketing mix) to a particular segment of the market in
order to match their needs and wants perfectly (or
meaningfully better than other competitors. A firm
following focus is not concerned with gaining full proximity
(see Figure 2).
Focus strategy depends on a
viable, distinct
segments which
not require
this strategy attempts to encourage the formation and
continued existence of such segments.
The competitive advantage of focus lies in the superior
knowledge of one segment's needs and wants.
Figure 2.
the Generic Strategies
Risks of low cost
Cost leadership is
not sustained
Level of proximity
Bases for
become very
differentiators and
focusers to
increase share.
Market becomes
Proximity level is
very low.
Source: [3, p. 21]
Risks of
Ability to gain
proximity, then
excel in the
provision of one
benefit, is not
Level of
proximity rises,
Bases for
become less
important to
Proximity is very
low. Market
fragmented to
the point that
focusers steal
the whole
market, segment
by segment.
Risks of focus
Understanding of
the segment's
characteristics is
Target segment
Target segment's
differences from
other segments
New focusers
sub-segment the
Porter's work on competitive strategy was exciting,
although certainly not complete. It was new marketing
theory but in its original form displayed a number of errors
which become evident when examined in a marketing
context. That this was not done in a decade of marketing
teaching and practice is a sad reflection on the unscholarly
haste in which apparently useful theories were placed into
the body of marketing theory (and textbooks).
This article, whilst critical of Porter's definitions of generic
competitive strategy, does attempt to emphasise Porter's
great contribution to marketing strategy
the concept
of market nature and the realisation that this nature is
influenced by the strategies adopted by firms operating
within the market. This theory represents a landmark in
the development of competitive marketing strategy and
has profound implications for the traditional works in this
area. Many other marketing writers' competitive
strategies appear to be highly simplistic, a collection of
tactics without a strategic framework. Competitive
marketing tactics and strategy now will have to be
rethought in the light of the concepts of market nature
and proximity, and the evolutionary (sometimes
revolutionary) process of change in market nature.
Porter, M.E.,
Analysing Industries
Free Press, New
York, 1980.
Speed, R.J., "Oh Mr Porter! A Reappraisal of
Competitive Strategy", Marketing Intelligence &
Planning, Vol. 7 No. 5/6, 1989.
Porter, M.E.,
Creating and
Free Press, New York,
Brown, L.,
Competitive Marketing
Maintaining and Defending Competitive
Nelson (Australia), South Melbourne, 1990.
Thompson, A. and Strictland, A.J., Strategic
(4th ed.), Business
Publications, Inc., Texas, USA, 1987.
6. Kotler, P., Chandler, P., Gibbs, R. and McColl, R.,
Marketing in Australia, (2nd ed.), Prentice-Hall,
Australia, 1989.
Wright, P. and Parsina, A., "Porter's Synthesis Of
Generic Business Strategies: A Critique", Industrial
(USA), May-June, 1988, p. 20.
8. Balan, P., "Quality as International Competitive
Advantage" unpublished working paper, University of
South Australia, 1990.
9. Porter, M.E., "Michael Porter
Competitive Strategy",
Harvard Business School Video
Mathur, S., "How Firms Compete:
New Classification
Vol. 14 No. 1, Autumn 1988, pp. 30-57.
McDonald, M.H.B., How to
Prepare Marketing
Heinemann, London, 1988.
Aaker, D.A.,
Strategic Market
(2nd ed.), John
Wiley & Sons, New York, USA, 1988.
Kotler, P.,
(5th ed.), Prentice-Hall, London, 1984.
Kotler, P. and Singh, R., "Marketing Warfare in the 1980s",
Winter 1982, pp.
Porter, M.E., "How Competitive Forces Shape Strategy",
Harvard Business
Vol. 57
2, 1979, pp. 137-44.
Porter, M.E., "Reflections and Round Table Discussion",
European Management
Vol. 6 No. 1, 1987.
Porter, M.E., The
Competitive Advantage
New York, 1990.
Quinn, J.B., Mintzberg, J.M. and James, R.M., The
(2nd ed.), Prentice
Hall, Englewood Cliffs, NJ, 1988.
A. and Trout, J.,
McGraw-Hill, New
York, 1986.
Thompson, A., Strictland, A.J. and Fulmer, W.E.,
(2nd ed.), Business Publications
Texas, USA, 1987.
Wright, P., "Research Notes and Communications: A
Refinement of Porter's Strategies",
Strategic Management
Vol. 8, 1987, pp.
Byron Sharp is lecturer in Marketing, University of South Australia, Adelaide, Australia.
... Porter's competitive strategies, there are three approaches of performing in any industry: overall cost leadership, differentiation, and focus [47]. Each strategy is integrated within a modern marketing theory framework, keeping in mind that each generic strategy is fundamentally a different approach to creating and sustaining a competitive advantage, as illustrated in Table 3 [48]. ...
... Differentiation can be determined by a vast palette of features such as better quality, lower price (high price), consumer service, reputation, provide greater awareness on the services offered and greater availability. The key stands in the adequate identification of different features that will provide a meaningful value to consumers to gain competitive advantage [47]. In health care services, the competitive advantage factors evolved over time, being shaped by the forces present in a market at a certain point in time. ...
... Three Generic Strategies[47], p. 4 ...
Full-text available
Competition in health care services has been considered as a core component in the consumer value mechanism. In Romania, the emergence of private ophthalmology services has as outcome a positive-sum competition which focuses on prevention, diagnosis and treatment of eye related diseases and disorders and improved value. The purpose of this paper was to provide an insight into the knowledge used by consumers when they make a decision regarding a private ophthalmology service with a specific interest on competition. A research model was elaborated and included quality, price, and satisfaction as components influenced by competition from the consumers’ perspectives. The model was validated using Structural Equation Modeling in SmartPLS. The sample was made up of 120 respondents and the sampling technique was quota. The structural model revealed that competition has a positive impact on satisfaction and explained 74% of its variance and also that competition has a positive impact on price and explained 7% of the variance. Moreover, using IPMA matrix analysis, the most powerful item of competition construct with an influence on satisfaction was the one related to the reputation of the private ophthalmology organization. Nonetheless, the key to gain competitive advantage stands in providing meaningful value to consumers using differentiation features such as high prices, reputation, and awareness on the services offered, greater availability, and the most important feature, innovation.
... Whilst Miller (2002) work on competitive strategies of religious organisations has been strategic management focused; Porter`s theory has been applied in marketing theorisation by most marketing scholars as competitive marketing strategies (eg. Brown, 1990;Sharp, 1991;Liu & Atuahene-Gima, 2018;Shokuhi & Chashmi, 2019) and as the basis for prescribing the marketing mix tactics firms can apply in attaining competitive advantage. Thus, the type of competitive marketing strategy adopted by a firm is reflective in a firm`s marketing mix tactics. ...
... product differentiation through innovation, thus, leading to brand recognition and customer loyalty and ultimately the firm's ability to charge premium prices (Koo et al., 2004;Timmers, 1999). This strategy is reflective in a firm`s marketing mix tactics including its product/service design and features, technology, service quality, brand image and distribution networks (Sharp, 1991;Tanwar, 2013). Example of companies utilising this strategy includes Apple and Starbucks. ...
Full-text available
The age-long controversy on the application of marketing in religious and church organisations has made some strides after almost a decade ago when Bruce Wrenn wrote: “religious marketing is different”. However, this has focused on the application of marketing mix tactics without a clear understanding of the competitive marketing strategies underpinning them. This study, thus, set out to explore and develop a theoretical understanding of the competitive marketing strategies adopted by churches in Ghana. This study used a focus group study consisting of active church members from the different denominational groups in Ghana who have relevant knowledge in marketing and the marketing tactics used by their church. Using a deductive thematic analysis approach, this paper identified marketing as a necessary tool for churches and several competitive marketing strategies adopted by churches in attaining competitive advantage were identified and discussed. Finally, the implications of the findings for church growth and survival as well as directions for future empirical research were also discussed.
... Clark (1961) expressed about workable competition and strategies, and exposed the dynamic competitive strategies, Hunt and Morgan (1995) put forward comparative advantage theory of competition applications on marketing mixes. Sharp(1991) explained how the competitive advantages can be achieved with the marketing mix based application.Whan Park and Smith, (1990) described an approach to competitive analysis that focuses on inter-industry learning and it delivers innovative ideas to develop within particular industries. SMEs has been facing severe competition by local and foreign brands. ...
... It is very important to pace with the competitors activities, if the SMEs fail to do, they want to leave from the business environment. Michael Porter′s definition of competitive strategies are based on using price to differentiate means a firm, using a low cost strategy and the value of a definition of focus strategy as merely some degree of extreme differentiation (Byron Sharp, 1991). Sales promotions are often conceived as tactical marketing strategy and it help to develop and maintain competitive advantage. ...
... Dickson and Ginter, 1987;Smith, 1956;Wind, 1978). Segmentation is a cornerstone of overall corporate strategy (Kaplan and Norton, 1996;Porter, 1980;Sharp, 1991), as it is widely assumed by marketers that different competing brands appeal to different consumers (Uncles et al, 2012). Furthermore, segmentation is widely considered to be a crucial part of marketing strategy as without it targeting and positioning strategy cannot be developed (e.g. ...
... The results suggest that it is likely that in both financial services, and other product categories, the best selling product for one competitor is likely to be the case for most other competitors. This poses a significant challenge to traditional corporate strategy (Kaplan and Norton, 1996;Porter, 1980;Sharp, 1991), whereby the assumption is made that competing brands can position themselves competitively by offering alternative product offerings to the market. ...
Full-text available
Segmentation and targeting are cited as being a core part of marketing strategy for any organisation. While there has been much written on brand segmentation, product segmentation research has not been common. This paper examines whether different types of customers buy different banking products. A sample of 52,000 Australian households and 12,000 in New Zealand from the Roy Morgan Single Source Survey was utilised to profile users of different banking products on offer. The results indicated that there is some segmentation or partitions evident in a limited number of banking products; for the most part there was little difference in customer profile across comparable products offered by Australian and New Zealand banks.
... Following is a strategy-based view on mergers and acquisitions that forecasts positive consequences for creating long-term competitive advantage. For example, through the acquirement of know-how, technology, market access, cost leadership, etc. (Porter, 1997;Sharp, 1991;Porter, 2008). Lastly, the theory of operational and financial synergies predicts positive mergers and acquisition performance through the economies of scope and scale, as well as an effective allocation of input resources, i.e. financial resources, within an internal capital market (Cheng & Wu, 2018;Niehaus, 2018). ...
Full-text available
Why do some mergers and acquisitions fail? Responding to this inquiry remains a thought-provoking undertaking in the fields of finance and strategic management in terms of corporate takeovers and mergers. Specifically, the impact of M&A on an acquiring company's business performance appears inconclusive through the lack of robust factors that can assist in foretelling post-merger failures or returns (King et al., 2004). In this regard, the paper examined the post-merger conflict in AirtelTigo to examine what the leading factors are in the post-merger conflict warranting the government of Ghana to take over the post-merger conflict AirtelTigo. Using a survey design, the study sampled fifty respondents from the corporate head office of the post-merged AirtelTigo. From the results, the paper concluded that the dominant conflict factor behind the post-merger conflict with AirtelTigo relates to structural conflict. The leading element in the structural conflict was noted as the slow post-merger integration process followed by the element of poor integration and planning execution. By way of recommendation, the paper recommends that the new owner, i.e. the government of Ghana in the process of taking over, should work out at improving all such conflict elements as it is right now among members in the organization.
... The literature concerning firm strategy and competitive advantage is quite extensive. There have been thousands o f articles written about competitive advantage and the framework behind understanding competitive advantage has occasionally been criticized (Wright, 1987;Wright and Parsinia, 1988;Speed, 1989;Sharp, 1991). ...
A primary question in the field of marketing strategy involves the role of marketing constructs in the strategic management of an enterprise. A key element of strategy is that firms can choose to follow either a cost or differentiation strategy to create a competitive advantage. Traditional theory suggests that a firm should choose Dose one approach because it is either too difficult to develop a dual cost and differentiation strategy or because the attention of top management is limited in enacting and monitoring a dual strategy. The choice of which performance measures to use to monitor and evaluate the effectiveness of the chosen strategy is an important decision for driving firm performance. Critics have suggested that the exclusive use of traditional financial measures fails to effectively capture the value created in the firm and that non-financial measures need to be added to increase the understanding of new sources of firm value. Research has provided evidence that non-financial measures such customer satisfaction can be linked to increased firm performance and firm value in conjunction with traditional financial measures. In this study, questions about the relationship between economic efficiency, customer satisfaction measures, and firm value metrics are investigated including the size and structure of these relationships. The goal is to relate the value gained by following either a cost strategy or a differentiation strategy or a combination of strategies to assist managers and investors in identifying the relationship between a firm's current condition and its capacity to produce future wealth. In order to explore these relationships, data were gathered from publicly available sources including the American Customer Satisfaction Index (ACSI) and the Stern Stewart Performance 1000. Key variables include the firm's ACSI score, Economic Value Added (EVA), and Market Value Added (MVA). A series of regression models are used to test the structure of how customer satisfaction and financial metrics are reflected in measures of market value added. In addition, a matrix evaluating firms based on their position relative to average EVA and ACSI is created to illustrate the relative effects of cost and differentiation strategies on the level of MVA created over time. The results suggest that the interaction of customer satisfaction measures (ACSI) with the financial metric of economic value added (EVA) is a significant positive predictor of market value added (MVA) and provides incremental value to the sole use of financial measures or non-financial measures in predicting firm value creation. In addition, firms that have both greater than average levels of customer satisfaction and cost efficiency have higher average levels of MVA compared with firms that are lower on either or both cost and differentiation measures. Implications are drawn for marketing practitioners and additional supplemental research topics for strategic marketing analyses are presented.
... Competitive advantage can also be described as the position a firm occupies in regards to its competitors (Porter, 1998). Competitive advantage can be explained as the resources and features of a company that helps it to do better than their competition (Chaharbaghi & Lynch, 1999;Sharp, 1991;Learning, 2009). ...
... According to Sharp (1991), one can question if cost leadership is a separate strategy. He says that having a cost advantage is a way to help to differentiate, usually on price. ...
Full-text available
This paper reviews the growth of trekking, as an adventure tourism activity, in Nepal’s tourism sector and introduces the Great Himalaya Trail (GHT). Four sustainable tourism-based interventions that have impacted on various sections of the GHT in Nepal are examined to identify planning assumptions and subsequent program outcomes. Research data gathered from GHT trekkers is examined and compared to general trekking and mountaineering statistics to answer the question, are GHT trekkers seeking the same experience as the average trekking tourist? In conclusion, GHT trekkers are identified as visitors to Nepal who seek a transformational and sustainable journey, and as such, are examples of a growing international tourism trend. Transformational journeys are then incorporated into a suggested model for regenerative tourism systems.
Segmentation and targeting have been considered a central component of marketing strategy for any organization for decades. This study considers the ability to utilize Irish print media to successfully target a high value segment. The aim of this study is twofold: first, to examine reader profiles of Irish daily papers and, second, to consider the accuracy of claimed target readers. Data from the Joint National Readership Survey was utilized to profile readers of the major newspapers available in Ireland. Results suggest once actual circulation size is taken into account there is unlikely to be any advantage in buying advertising space in a publication that claims to target a specific target reader with a smaller circulation, rather than buying advertising in a large circulation mainstream tabloid.
With the publication of his best-selling books "Competitive Strategy (1980) and "Competitive Advantage (1985), Michael E. Porter of the Harvard Business School established himself as the world's leading authority on competitive advantage. Now, at a time when economic performance rather than military might will be the index of national strength, Porter builds on the seminal ideas of his earlier works to explore what makes a nation's firms and industries competitive in global markets and propels a whole nation's economy. In so doing, he presents a brilliant new paradigm which, in addition to its practical applications, may well supplant the 200-year-old concept of "comparative advantage" in economic analysis of international competitiveness. To write this important new work, Porter and his associates conducted in-country research in ten leading nations, closely studying the patterns of industry success as well as the company strategies and national policies that achieved it. The nations are Britain, Denmark, Germany, Italy, Japan, Korea, Singapore, Sweden, Switzerland, and the United States. The three leading industrial powers are included, as well as other nations intentionally varied in size, government policy toward industry, social philosophy, and geography. Porter's research identifies the fundamental determinants of national competitive advantage in an industry, and how they work together as a system. He explains the important phenomenon of "clustering," in which related groups of successful firms and industries emerge in one nation to gain leading positions in the world market. Among the over 100 industries examined are the German chemical and printing industries, Swisstextile equipment and pharmaceuticals, Swedish mining equipment and truck manufacturing, Italian fabric and home appliances, and American computer software and movies. Building on his theory of national advantage in industries and clusters, Porter identifies the stages of competitive development through which entire national economies advance and decline. Porter's finding are rich in implications for both firms and governments. He describes how a company can tap and extend its nation's advantages in international competition. He provides a blueprint for government policy to enhance national competitive advantage and also outlines the agendas in the years ahead for the nations studied. This is a work which will become the standard for all further discussions of global competition and the sources of the new wealth of nations.
The essence of strategy formulation is coping with competition. Yet it is easy to view competition too narrowly and too pessimistically. While one sometimes hears executives complaining to the contrary, intense competition in an industry is neither coincidence nor bad luck.
Michael Porter presents a comprehensive structural framework and analytical techniques to help a firm to analyze its industry and evolution, understand its competitors and its own position, and translate this understanding into a competitive strategy to allow the firm to compete more effectively to strengthen its market position. The introduction reviews a classic approach to strategy formulation, one that comprises a combination of ends and means (policies), factors that limit what a company can accomplish, tests of consistency, and an approach for developing competitive strategy. A competitive strategy articulates a firm's goals, how it will compete, and its policies for achieving those goals. Competitive advantage is defined in terms of cost and differentiation while linking it to profitability. Part I, "General Analytical Techniques," provides a general framework for analyzing the structure of an industry and understanding the underlying forces of competition (and hence profitability). Five competitive forces act on an industry: (1) threat of new entrants, (2) intensity of rivalry among existing firms, (3) threat of substitute products or services, (4) bargaining power of buyers, and (5) bargaining power of suppliers. Looking at industry structure provides a way to consider how value is created and divided among existing and potential industry participants. One competitive force always captures essential issues in the division of value.There are three generic competitive strategies for coping with the five competitive forces: (1) overall cost leadership, (2) differentiation, and (3) focus. There are risks with each strategy. A firm without a strategy is "stuck in the middle." This framework for examining competition transcends particular industry, technology, or management theories. Building on this framework, techniques are presented for industry forecasting, analysis of competitors, predicting their behavior, and building a response profile. Essential for a competitive strategy are techniques for recognizing and accurately reading market signals. Implications of structural analysis for buyer selection and purchasing strategy are presented. Game theory provides concepts for responding to competitive moves. Using the concept of strategic groups, structural analysis can also explain differences in firm performance (profitability), provide a guide for competitive strategy, and predict industry evolution. Part II, "Generic Industry Environments," shows how firms can use the analytical framework to develop a competitive strategy in industry environments, which reflect differences in industry concentration, state of industry maturity, and exposure to international competition. These environments determine a business's competitive strategic context, available alternatives, and common strategic errors. Five generic industry environments are examined: fragmented industries (where level of industrial concentration is low), emerging industries, transition to industry maturity, declining industries, and global industries. In each, the crucial aspects of industry structure, key strategic issues, characteristic strategic alternatives (including divestment), and strategic pitfalls are identified. Part III, "Strategic Decisions," draws on the analytical framework to examine important types of strategic decisions confronting firms that compete in a single industry: vertical integration, major capacity expansion, and new business entry. Additional use of economic theory and administrative consideration of management and motivation helps a company to make key decisions, and gives insight into how competitors, customers, suppliers, and potential entrants might make them. Appendix A discusses use of techniques for portfolio analysis applied to competitor analysis. Appendix B provides approaches to conducting an industry study, including sources of field and published dat
Advertising has become a strategic weapon rather than a tactical one. Advertisers no longer run ads to sell products, they run ads to establish a position. Advertising is too expensive to justify on the basis of today's results. A one-minute commercial on the 1987 Super Bowl costs you more than a million dollars. Yesterday, readership was the key measure of an ad's effectiveness. Today, most advertisers pay little attention to readership reports and coupon contents. They want to know what position they occupy in the minds of the prospects.