Porter's Generic Strategies - revisited

• Cost Leadership
• Differentiation
• Focus (cost & product)
• Integrated cost leadership and differentiatioin

A cost-leadership strategy means you aim to be the firm with the lowest cost-base in the broad sector or industry.
A cost-focus strategy aims for cost advantage within a specific segment
A broad-differentiation involves a differentiated product or service across  a broad range or industry
A differentiation-focus strategy aims for differentiation within a specific segment
An integrated cost-leadership/differentiation strategy involves offering a differentiated product at a relatively low price. (instead of the more usual price premium).

Cost-based strategies (Grant 2002) have 8 drivers:-

1. economies of scale and scope - sources include
• technical input-output relatioinships
• indivisibility
• specialisation
2. economies of learning
3. process technology
4. process design
5. product service design
6. capacity utulisation
7. input costs u5s3p24
• locational differences in input prices
• ownership of low-cost sources of supply
• non-union labour
• bargaining power
8. residual differences in operating efficiency

A broad cost-leadership strategy is a good fit where number 1 above is possible and product differentiation would be hard. Value chain analysis is appropriate.


Differentiation focus can be achieved through customer service relationships or product, for example. You need to provide unique benefits while minimising the additional cost across the value chain, so that additional income generated more than covers the cost of providing the unique benefits.

A differentiation focus might be appropriate where a target segment has unique needs and is willing to pay a premium for the right product or service features. BMW can be considered to operate a differentiation strategy. u5s2p27.


The increased complexity of many competive environments has led to an additional 5th "box" on the generic strategies matrix, right in the middle. This reflects recognition that it is possible to offer a differentiated product or service at the same time as operating with low costs. This is a difficult strategy to operate. It is a departure from Porter's original analysis.