Porter 's Business Level Strategy Essay

1418 Words Dec 1st, 2014 6 Pages
In this essay the views of Porter that companies who engage in every generic strategy but fails to achieve any of them will be stuck in the middle and thereby possesses no competitive advantage (Porter. 1985) and Bowman’s and Ambrosini’s that despite Porters risks some firms have been successful by combining both strategies (1997) will be critically evaluated.
Before the critical analysis can begin, the main concept of Porter’s business-level strategy will be outlined briefly. According to Porter a firm can only be successful if it specializes in one out of two different options, which he considers to be opposites. The first is cost leadership where a company tries to be the lowest cost producer in its industry and the second is differentiation, which is when a company tries to be unique along dimensions that will be valued by costumers. Cost leadership for Porter means the use of an aggressive strategy in order to minimise and control costs. This is linked to competitive strategy, due to the fact that a low cost position yields the firm above average returns. (Jones & Butler. 1988)
The differentiation strategy on the other hand liberates the company from having to maintain a low cost position because it can take advantage of customer loyalty to archive higher margins, but according to Porter the costs of archiving customer loyalty are equal to the gains. (Jones & Butler. 1988) It means that differentiation heightens costs while cost leadership uses standardisation that…

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