How to gain competitive advantage and profitability according to michael porter

Porter have drastically changed the thought process of not only business men but also made significant changes in the mindset of researchers, academicians, students etc.

This creates a low profitability and organizations can react strongly to potential new entrants in such markets. Value chain represents all the internal activities a firm engages in to produce goods and services.

The possibilities and strategies that need to be implemented in order to achieve this position are largely influenced by the structure of the business sector in which an organization operates.

This strategy enables a firm to get the most out of specific segment and develop a competitive advantage which is hard to imitate by other firms in the industry. You, therefore, need to be confident that you can achieve and maintain the number one position before choosing the Cost Leadership route.

For the effective and efficient completion of these primary activities there are certain support activities. Cost Advantage and Differentiation Advantage Competitive advantage is created by using resources and capabilities to achieve either a lower cost structure or a differentiated product.

Product differentiation When established enterprises enjoy brand identification and customer loyalty, new entrants are forced to invest heavily to be able to compete with this. Southwest Airlines has experienced nothing but strong growth and profitability by following the cost-leadership strategy.

Economic development quarterly, Vol. According to Porter, a firm can get cost leadership benefit by reducing the cost at each level of value chain Graham Competitive advantage helps in gaining competitive strength in a particular business or product.

Titan watches Without following anyone of above mentioned competitive strategies, it becomes very difficult for firms to sustain in competitive industry.

Michael Porter's Generic Strategies

Because they serve customers in their market uniquely well, they tend to build strong brand loyalty amongst their customers.

Differentiation focus Under this strategy, firm aims to differentiate itself from one or two competitors, again in specific segments only. Cost Leadership, Differentiation and focus. To achieve a competitive advantage, the firm must perform one or more value creating activities in a way that creates more overall value than do competitors do.

An example of a capability is the ability to bring a product to market faster than competitors. It helps the firms in identifying prospective opportunities for adding value to customers. It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs.

In addition to this, they can also reduce the existing level of demand for a particular product though providing a poor or sub-standard input. This model can be termed as one of the most used frameworks in the field of strategic management.

Cost Leadership Here, the objective of the firm is to become the lowest cost producer in the industry and is achieved by producing in large scale which enables the firm to attain economies of scale.

In both the ways the companies have to compromise with their market share and ratio of profit. When these costs are very high, it is harder to persuade customers to switch suppliers. It is essential for existing organizations to create high barriers to enter to deter new entrants.

Competitive Strategies

In different literature it is said that success of any organization depends on its internal structure and process, but it is also get affected by the external environment in which it is working.

A good example is a large basket filled with reading glasses that are on sale and which are placed next to the magazines and books. This model is based upon the perfect competition in a market through which market forces are regulated but in present circumstances these kinds of market are hardly found.

Good research, development and innovation. Kuroiwa, L and Toh, M. One of the competitive forces by Michael Porter has been identified as threats of substitute and alternative.

IFSM 300 Quiz 1

Companies cannot differentiate so much with respect to the product and therefore they must try and drive away the competitor from the market by means of price wars, for example. To make a success of a Differentiation strategy, organizations need: Porter specifically warns against trying to "hedge your bets" by following more than one strategy.

Porter’s Five Forces Model of Competition

According to Porter, differentiation refers to offering additional or unique benefits in product that is perceived as differentiating factor by the customers.To gain competitive advantage over For a discussion of the two basic types of competitive advantage, see Michael E.

Porter, See Michael E. Porter, “How Competitive Forces Shape Strategy. In order to explain as to why some nations gain competitive advantage over others, Porter carried out a four-year study of 10 countries and published his findings in the form of a book in the year According to Michael Porter, a competitive strategy is concerned with how a company can gain a competitive advantage through a distinct way of competing.

Porter suggests that all of the activities of the firm can be designed in a way that gives a company a unique competitive strategy.


tencies and gain a competitive advantage”. Competitive advantage, as the central object of most corporate strategies, is defined more clearly according to Michael Porter, Competitive Advantage.

Value chain analysis is a strategy tool used to analyze internal firm activities.

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Its goal is to recognize, which activities are the most valuable (i.e. are the source of cost or differentiation advantage) to the firm and which ones could be improved to provide competitive other words, by looking into internal activities, the analysis reveals where a firm’s competitive.

Michael E. Porter of Harvard Business School developed the According to Porter the “ awareness of these forces can help a company stake out a competitive advantage.

Today’s organizations have better access to far more information about their customers, suppliers.

How to gain competitive advantage and profitability according to michael porter
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