Porter Argues That If a Firm Is to Attain Competitive Advantage; It Must Choose Between the Types of Competitive Advantage It Seeks, Discuss Using an Industrial Example?

1468 Words Nov 9th, 2012 6 Pages
Porter argues that if a firm is to attain competitive advantage; it must choose between the types of competitive advantage it seeks, discuss using an industrial example?

An industry can be defined as a group of companies offering products that are closely substituting for each other in order to satisfy customers. Competitive advantage can be defined as when a firm sustains profit which exceeds the company’s average; it automatically possesses competitive advantage over rivals. The business strategy for most companies is to achieve a sustainable competitive advantage. This essay aims to discuss why firms must choose between types of competitive advantages using an industrial example.

Michael Porter indentified that there are 2
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Porter states that there are 2 types of competitive advantage a firm can possess as mentioned above however , there are 3 generic strategies for achieving competitive advantage in an industry; cost advantage/leadership, differentiation and focus. The first type of competitive advantage is cost advantage /leadership, it is when a firm becomes low cost producer in its industry. It minimizes the cost to the organization of delivering products and services. According to Porter (1985) , there are two ways of achieving cost leadership either by increasing profit by reducing costs while charging the average price. Or by increasing market share through charging lower prices while still achieving a reasonable profit on each sale because your cost has been reduced. Furthermore, companies that are successful in achieving cost leadership usually have an access to the capital needed to invest in technology which helps reduce the cost.
Also, they have very efficient logistics and a low cost base such as labor, materials and facilities (Ibid, 1985). Essentially, if a firm can achieve and maintain cost leadership, it can obtain above average performance whilst the prices are still affordable in that industry. Hence, the cost leader does not try to be the industry innovator, it seeks to position its products to appeal to the average customer taste. The aimed goal is to increase efficiency and lower its costs in relation to competitors. Some of the

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