Porters Generic Strategies Flashcards
What is a competitive advantage?
An advantage customers see when buying its products compared to it’s rivals.
What are the two types of competitive advantages that porter identified?
Cost advantage
Differentiation advantage
What is cost advantage?
Selling a similar product to rivals but at a lower cost.
What is differentiation advantage?
Selling better products at the same or slightly higher than competitors.
What is product differentiation?
A product that consumers see as different from rivals, can make them think its better.
Why is a competitive advantage good?
Because they can sell a high volume at a lower price and make a large profit. Or vice versa
What can a competitive advantage build?
Brand loyalty
Why can it be hard to hold onto a competitive advantage?
Competitors can lower price
Rivals can copy your features
Consumers tastes change
Economy changes
What were porters three strategies?
Cost Leadership
Differentiation
Focus
What does cost leadership require?
The lowest cost of production for a level of quality
What types of businesses can use cost leadership?
Big firms benefitting from economies of scale
Why is cost leadership good?
In a price war, firm can maintain profitability
If prices decline, firms can stay profitable due to low cost.
What does differentiation strategy require?
It requires a product with unique attributes which consumers perceive to be better than competitors.
What do differentiated products allow?
They allow biz to charge premium prices
Which types of businesses can benefit from differentiation?
Biz that are innovative, have strong branding and offer quality products
