Generic Strategies - The Key To Competitive Advantage

I have always been a huge Michael Porter fan. He's a brilliant economist and one of the godfathers of business strategy. His theories about strategy were developed over 30 years ago, and not only are they still valid, but they are needed now more than ever. The focus of Porter is how to create a sustainable competitive advantage over your competitors. Other than farming, I think the Internet is one of the most difficult places to create a long term competitive advantage. The ease with which other models can be duplicated and the two dimensional nature of the medium is what creates this difficulty. Because of the challenges the Internet presents, a look at Porter's model can be an enlightening experience.

Porter's Generic Strategies

The reason many people hate Porter is because of the simplicity of his theory. In Porter's world their are only four viable strategies that can lead to long term success.

• Cost Leadership: This involves focusing on multiple segments and providing lower costs while maintaining comparable value. Think Wal-Mart.
• Cost Focus: This involves the same strategy as above, but concentrating an a subset of the larger market. Think Dollar Store.
• Broad Differentiation: This involves delivering superior value to many industry segments at justifiable prices. Think Dillard'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. Think Sharper Image.