Competitive strategies require actions which create defendable positions. The most widely understood and written about competitive strategies include, cost leadership, differentiation and focus. But in today's marketing environment how do businesses implement competitive strategies which give them competitive advantage which is sustainable?



Michael Porter suggested three generic strategies for competitive advantage:

Cost Leadership – being the lowest-cost producer in the industry as a whole

Differentiation – the exploitation of a product or service which the industry as a whole believes to be unique (most businesses compete in this way)

Focus – a restriction of activities to only part of the market (a segment) through:

• Providing goods and/or services at lower costs the that segment (cost-focus)

• Providing differentiated product or service to that segment (differentiation-focus)

There are inherent risks with Porters generic strategies. In practice is not that simple to draw hard and fast distinctions between the generic strategies as there are underlying conceptual problems. Porter suggested that being stuck in the middle of these strategies is not place to compete and can only lead to low profits and low market share.

Problems with cost leadership

Cost in a business usually refers to internal measures. Companies use many techniques such as benchmarking and business process re-engineering to reduce internal costs. To pursue a cost leadership strategy the important factor is market share, not reducing internal costs.

Only one business can be a cost leader in any industry. If several companies pursue this strategy a price war may start.

Having lower costs does not mean you have to charge lower prices or compete on price. A cost leader will have higher margins and can choose to invest this in research and development or marketing giving flexibility to choose other competitive strategies.

Problems with differentiation

A differentiated product may be sold at the same price as competing products in order to gain market share.

It is also unclear about which competitors the differentiated product will compete with and if they will be competing on the same basis.

Differentiation can come from all aspects of a company's offer not just the final product, so understanding the source of your differentiation is important.

A focus strategy has fewer conceptual difficulties as it ties in with the process of market segmentation. In practice most companies pursue this strategy to some extent by designing products/services to meet the needs of customers or the particular market.

So in reality businesses do pursue ‘stuck in the middle strategies' very successfully with different approaches to price and perceived added value (the differentiation factors) in the eyes of customers.

All businesses need to sustain their competitive advantage. This can be achieved through better products, customer perceptions, costs, competencies and assets, economies of scale, attitudes and relationships.

It is worth remembering that the best competitive advantages depend on the needs of the market and existing competitors. The best advantages are always the hardest to copy.

In today's fast changing markets sustainable competitive advantage is paramount to business success.

So many businesses are now operationally excellent; products fast become commodities and marketers need to think about what really differentiates their business from competitors.

Looking at some of the other aspects of business such as innovation, core competencies, service quality, culture, management and relationships are the areas that companies can differentiate and build long term sustainability. Doing the same things in the same ways only leads to strategic wear out and reduced profits. It is time to think beyond products and look at the wider aspects of the business where advantage can be gained.