A Critique of Porter's Cost Leadership and Differentiation Strategies: An Update | Chapter 14 | New Innovations in Economics, Business and Management Vol. 9

 This is an updated version of a previously published critique of Porter's cost leadership and differentiation techniques (Datta, 2010a).

The author presented an alternative competitive paradigm in this critique of Porter. To test his idea, he conducted investigations of twelve consumer marketplaces in the United States.

This revision integrates the findings of that empirical study and updates it.

Porter associates high market share with cost leadership, using General Motors (GM) as an example of a successful implementation. GM, on the other hand, became the market share leader in the American car industry thanks to a 1920s-era market segmentation, differentiation, and broad reach strategy.

Cost leadership and distinctiveness, according to Porter, are both feasible paths to competitive success. Despite this, a When contrasted to the competition, a differentiation strategy based on greater quality is more lucrative than a cost leadership plan. It may help a company become a market share leader and, as a result, a low-cost leader.

Differentiation and cost leadership may coexist, according to research. Porter, on the other hand, maintains that any generic approach needs a distinct culture and philosophy. Porter's generic tactics, on the other hand, are far too broad. His main concept, which prescribes cost leadership approach as the sole way to market share leadership and provides a restricted vision of differentiation with a unique product—sold at a premium price—on one side, and a "standard, or no-frills" product on the other, is faulty.

Porter's cost, according to Mintzburg, is The term "price differentiation" should be used to describe a leadership strategy that is based on a lower price than the competitors. Business strategy, according to him, has two dimensions: distinction and scope. Setting aside scope, competitive strategy consists of only one element: distinctiveness.

So, the question isn't whether to differentiate, but rather how to do so.

First, make customer-perceived quality the cornerstone of competitive strategy, since it is considerably more important than any other component in long-term success. Second, serve the middle class by competing in the mid-price market, providing superior quality at a somewhat higher price than the competitors. This is the approach that can lead to market share leadership, which is a successful and long-term strategy.


Author(S) Details

Y. Datta
College of Business, Northern Kentucky University, Highland Heights KY 41099, USA.

View Book:- https://stm.bookpi.org/NIEBM-V9/article/view/6969