Porters Strategies in Management

A popular and effective model for formulating strategy is Porter’s competitive strategies. Michael E. Porter studied a number of business organizations and proposed that business-level strategies are the result of understanding competitive forces in the company’s environment.

To find a competitive edge within the specific business environment, Porter suggests that a company can adopt one of three strategies: differentiation, cost leadership, or focus.

A differentiation strategy is a strategy with which managers seek to distinguish the organization’s products and services from those of others in the industry. A cost leadership strategy is a strategy with which managers aggressively seek efficient facilities, cut costs, and use tight cost controls to be more efficient than others in the industry. A focus strategy is a strategy where managers use either a differentiation or a cost leadership approach, but they concentrate on a specific regional market or buyer group.

In his studies, Porter found that some businesses did not consciously adopt one of these three strategies and were stuck with no strategic advantage.