Developing an effective competitive strategy requires understanding competitive advantage, which is what sets an organization apart; that is, its distinctive edge, which comes from:

• The organization’s core competencies—doing something that others cannot do or doing it better than others can do it.

• The company’s resources—having something that its competitors do not.

Porter’s competitive strategies framework:19

1. 1 Cost leadership strategy

   Having the lowest costs in its industry and aimed at broad market.

   • Highly efficient.

   • Overhead kept to a minimum.

   • Does everything it can to cut costs.

   • Product must be perceived as comparable in quality to that offered by rivals or at least acceptable to buyers.

2. 2 Differentiation strategy

   Offering unique products that are widely valued by customers and aimed at broad market.

   • Product differences: exceptionally high quality, extraordinary service, innovative design, technological capability, or an unusually positive brand image.

3. 3 Focus strategy

   A cost advantage (cost focus) or a differentiation advantage (differentiation focus) in a narrow segment or niche (which can be based on product variety, customer type, distribution channel, or geographical location).

   

4. 4 Stuck in the middle

   What happens if an organization can’t develop a cost or differentiation advantage—bad place to be.