Porter’s Generic Strategies

Porter’s Generic Strategies
Low-Cost (Cost Leadership) Strategy (Without Focus)
Focus-Low-Cost Strategy
Differentiation Strategy (Without Focus)
Focus-Differentiation Strategy
Low-Cost-Differentiation Strategy
Focus-Low-Cost-Differentiation Strategy
Multiple Strategies
The Miles and Snow Strategy Framework
Business Size, Strategy, and Performance
Assessing Strategies
Global Concerns
Summary
Key Terms
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SAGE Books – Business Unit strategies

Review Questions and Exercises
Practice Quiz
Student Study Site
Notes

After a firm’s top managers have settled on a corporate-level strategy, focus shifts to how the
firm’s business unit(s) should compete. A business unit is an organizational entity with its
own unique mission, set of competitors, and industry. While the corporate strategy concerns
the basic thrust of the firm—where top managers would like to lead the firm—the business
strategy, or competitive strategy, addresses the competitive aspect— who the business
should serve, what needs should be satisfied, and how core competencies can be developed
and the business can be positioned.

Another way of addressing the task of formulating a business strategy is to consider whether
a business should concentrate on exploiting current opportunities, exploring new ones, or
attempting to balance the two. Exploitation generates returns in the short term whereas
exploration can create forms of sustainable competitive advantage for the long term. The
business strategy developed for an organization seeks, among other things, to resolve this
challenge.1.

A business unit is an organizational entity with its own mission, set of competitors, and
industry. A firm that operates within only one industry is also considered a business unit.
Strategic managers craft competitive strategies for each business unit to attain and sustain
competitive advantage, a state whereby its successful strategies cannot be duplicated easily
by rivals.2. In most industries, a number of different competitive approaches can be
successful, depending on the business unit’s resources.

Each business competes with a unique competitive strategy, but attempting to analyze all of
the different strategies in a large industry can be quite cumbersome. In the interest of
parsimony, it is useful to categorize different strategies into a limited number of generic
strategies based on their similarities. Businesses adopting the same generic strategy
comprise a strategic group.3. In the airline industry, for example, one strategic group may
comprise carriers such as Southwest Airlines and Frontier that maintain low costs by offering
low fares and no frills on a limited number of domestic routes. A second strategic group may
comprise many traditional carriers such as Delta, United, and American that serve both
domestic and