Generic Strategies - The Key To Competitive Advantage

If you're a fan of evergreen content, you'll love Michael Porter. His theories about strategy were developed over 30 years ago, and are still the basis for every strategy text book written today. The focus of Porter is how to create a sustainable competitive advantage. The economics behind Porter's generic strategies model show companies how to stop mimicking their competitors and start making decisions. Porter taught the business world that strategy is as much about what you decide not to do, than what you decide to do.

His generic strategies model presents the four strategies that lead to success in any industry. Failing to properly execute one of the four strategies below leaves one, "stuck in the middle."

Porter's Generic Strategies

• Cost Leadership: This involves focusing on multiple segments and providing lower costs while maintaining comparable value. Example: Wal-Mart.
• Cost Focus: This involves the same strategy as above, but concentrating an a subset of the larger market. Example: Dollar Store.
• Broad Differentiation: This involves delivering superior value to many industry segments at justifiable prices. Example: Nordstrom's.
• Focused Differentiation: This is a common strategy for innovative and ambitious entrepreneurs. It involves creating superior value at justifiable prices to a niche market segment. Example: The itch Newpaper.

A full review of Porter's generic strategies model is beyond the scope of the post, but Understanding Michael Porter: The Essential Guide to Competition and Strategy is a great introduction and summary of Porter that will save you from his longer tomes.