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PORTER'S FIVE FORCES ANALYSIS COMPETITIVE STRATEGY
This is a useful model for analysing the factors that affect the competitive environment and
long run profitability of an industry.
A firm can use what
they know about the 5 forces to help determine their global strategy. They must know
which of the 5 poses the biggest threats to them and which one is most likely to affect
their profit in a negative way. The next step is for the business to work out how to tackle
that threat and overcome it.
In order to do this there are three different strategies that can be used, these are called
The generic strategies:
Cost Leadership This strategy calls for the lowest costs of production for a given
level of quality. It helps firms maintain profitability during price wars or in markets
where consumers have low spending power. It requires a broad market such as a
global market, with huge production facilities to take advantage of economies of
Differentiation This strategy requires a product with unique attributes which
consumers value, so that they perceive it to be better than rival products and
prepare to pay a premium price for it.
Focus This stratergy concentrates on a narrow market segment to acheieve either
cost advantage or differentiation. Firsms adopting this strategy usually have loyal
cstomers, which makes it very hard for other firms to compete.