4.9 Porters Generic Strategies

What is Lower Cost?

where a business gains a competitive advantage by being the low cost producer in the economy

Advantages of Lower Cost (3)

competitive advantage, attracts price sensitive customers, can withstand price wars longer than compeitors

Disadvantages of Lower Cost (3)

may reduce quality, if prices are low sales must increase for profit, can be challenging long-term if competitors continue to lower cost

What is Differentiation?

where a business gains a competitive advantage by being unique in some way, that is valued by customers

Advantages of Differentiation (3)

competitive advantage, can develop brand loyalty, reduces price sensitivity

Disadvantages of Differentiation (3)

often more expensive to be unique, premium price may narrow the customer base, possibility of being replicated by competitors