4.9 Porters Generic Strategies

What is Lower Cost?

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

Advantages of Lower Cost (3)

competitive advantage, attracts price sensitive customers, business saves money in processes through increased efficiency

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)

gain a competitive advantage, develop brand loyalty, increased profits

Disadvantages of Differentiation (3)

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