Business Strategy

“Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different”

(Michael Porter, 1996).

Porter hypothesizes that for companies, choosing what not to do is as important as what to do. It implies that strategy is how a company moves from its current spot to where it wants to be. The strategy involves identifying choices that must be made over the company’s journey to reach its goals.

Michael Porter has made substantial contributions to the field of business strategy. His work has had a lasting impact on how businesses approach competition and strategic decision-making. Porter’s ground-breaking concept has reshaped the way companies perceive their markets, competition, and positioning.

In his seminal book “Competitive Advantage: Creating and Sustaining Superior Performance” (1985), Michael Porter introduced three generic strategies that companies could adopt to gain a competitive advantage. Porter’s Generic Strategies represent a cornerstone of modern strategic thinking. These strategies provide a framework for businesses to achieve and sustain a competitive advantage in their respective markets.

Porter asserted that to achieve above-average performance in an industry, a firm must choose the type of competitive advantage it seeks and the scope in which it will pursue it. This choice results in three generic strategies: cost leadership, differentiation, and focus (“cost focus” and “differentiation focus”).

How we can help you:

  1. Identify Porter’s Generic Strategy:
  • Evaluate your company’s existing capabilities, resources, and market positioning to align with one of Porter’s Generic Strategies, considering the unique value proposition you offer in the market.
  • Assess the external competitive landscape to understand your competitors’ position and identify gaps or opportunities that align with the chosen generic strategy.
  1. Identify relevant trade-offs in adopting Porter’s Generic Strategy:
  • Examine the potential trade-offs associated with the chosen strategy, such as the balance between cost and differentiation. For instance, pursuing a cost leadership strategy may require streamlining operations but might limit the ability to offer highly differentiated products.
  • Another example is the potential trade-offs of focus, recognizing the need to concentrate resources on a specific market segment, which creates the trade-offs between serving a niche market exceptionally well and potentially missing out on broader market opportunities.
  1. Create a Business Model Canvas to support the Strategy: 
  • Aligns business model with Porter’s Generic Strategies by mapping out nine key elements (customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure) that tie into strategic choices.
  • Assesses capabilities and the competitive landscape to visualize how to pursue cost leadership, differentiation, or focus strategies.
  • Highlights trade-offs, like resource allocation and market scope, making it easier to balance cost-efficiency with differentiation or broad vs. niche market focus.

Please contact: fajar.hidayat@trade-off.id