Porter’s Competitive Advantage Strategies

Question 1

Firms that aim at capturing market share within their industry by virtue of lowest price.

Answer 1

Cost leadership

Charles Schwab built a “no frills” investment firm by using technology—computerized order processing. IKEA accomplishes it through careful product design, transferring some activities to customers, and working closely with its suppliers.

Question 2

Firms that aim for being able to charge a higher price by offering something different or by offering the same thing in a different way from competitors in their industry or market—or by creating the perception that a product is different through superior marketing.

Answer 2

Differentiation

For example, it is possible to buy prescription lenses in expensive frames from many online retailers, but Warby Parker distinguishes itself from those competitors by, for every pair sold, donating a pair of glasses to someone in need.

Question 3

Strategy that apply cost leadership or differentiation within narrow industry segments or niches.

Answer 3

Focus

Ryanair applies an aggressive low-cost strategy to the leisure travel segment of the airline industry.