Michael Porter Five Generic Competitive Strategies

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The five generic competitive strategies include:

1)      Low-Cost Provider

2)      Broad Differentiation

3)      Focused Low-Cost

4)      Focused Differentiation

5)      Best-Cost Provider

According Michael Porter, strategies allow organization to gain competitive advantage from three different bases which are:

1)      Cost leadership

2)      Differentiation

3)      Focus

Porter calls these bases as “generic strategies”. Firstly, cost leadership refers to producing standardized products at a very low per-unit cost for consumers who are price-sensitive. There are two alternative types of cost leadership which are low-cost strategy and best-value strategy. Low-cost strategy offers products or services to a wide range of customers at a lowest price available on the market. Meanwhile, best-value strategy offers products or services to a wide range of customers at the best price-value available on the market. Both two types of strategies target a large market.

Secondly, Porter’s generic strategy is differentiation. It is a strategy aimed at producing products and services considered unique industry wide and directed at consumers who are relatively price-insensitive. A successful differentiation strategy allows a firm to charge a higher price for its product and to gain customer loyalty because consumers may become strongly attached to the differentiation features. Special features that differentiate one’s product can include superior service, spare parts availability, product performance, useful life, ease of use and etc. the most effective differentiation bases are those that are hard or expensive for rivals to duplicate.

Lastly, Porter’s generic strategy is focus. Focus means producing products and services that fulfill the needs of small group consumers. Two alternative types of focus strategies are focused low-cost and focus differentiation. Low-cost focus strategy offers products or services to a small range of customers at the lowest price available on the market. Meanwhile, focused differentiation offers products or services to a small range of customers at the best price-value available on the market. It is sometimes called “best-value focus”. The aim is to offer a niche group of customers’ products or services that meet their taste and requirements better than rivals’ product do. Both two types focus strategies target a small market.