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  • Writer's pictureDr. Alan Grossnickle

What is and Why Strategy? An academic and business world explanation!

Chess board

Harvard professor Michael Porter has been the expert on Strategy since the eighties both academically and in the business world.

“Porter argued that, in order to examine its competitive capability in the marketplace, an organization must choose between three generic strategies:

  • Cost leadership – becoming the lowest-cost producer in the market. (Walmart)

  • Differentiation – offering something different, extra, or special. (BMW)

  • Focus – achieving dominance in a niche market. (Aldi)

These generic strategies are driven by five competitive forces that an organization has to take into account:

  • The power of customers to affect pricing and reduce margins;

  • The power of suppliers to influence the organizations pricing;

  • The threat of similar products to limit market freedom and reduce prices and thus profits;

  • The level of existing competition that impacts on investment in marketing and research and thus erodes profits;

  • The threat of new market entrants to intensify competition and further impact on pricing and profitability.”

Porter, M. (2006). Business the Ultimate Resource, p. 1254.

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