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Competitive factors

 Cost leadership – this involves the business making a product of similar quality
to its rivals but at a lower cost. This is normally achieved through internal
inefficiencies.

 Differentiation – this involves the business persuading customers that their
product is superior to that of their rivals. It can be done by adding additional
features to the product or by altering customer perception of the product
through advertising or branding. Differentiation will usually allow the business
to charge a premium price for its product.

 Focus – this involves aiming at a segment of the market, rather than the market
as a whole. A particular group of consumers is identified with the same needs
and the business will provide products or services that are tailored to their
needs. This will typically allow the business to charge a premium for their
products.

Conclusion

Porter argued that businesses needed to adopt one of the above three approaches
or they would be ‘stuck in the middle’, which would make it difficult for them to
compete successfully.

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