152 Strategic Marketing: Planning and Control■ Competitive advantage
The notions of competitive advantage and marketing strategy are intrin-
sically linked. Competitive advantage is the process of identifying a fun-
damental and sustainable basis from which to compete. Ultimately,
marketing strategy aims to deliver this advantage in the market place.
Porter (1980) identifies three generic strategies– fundamental sources of
competitive advantage. These are: cost leadership, differentiation and focus.
Arguably, these provide a basis for all strategic activity and underpin the
large number of marketing strategies available to the organisation. Add-
itionally, management needs to define the competitive scope of the
business – targeting a broad or narrow range of industries/customers (see
Figure 8.2). Essentially either operating industry wide or targeting specific
market segments. Each generic strategy is examined in turn.Strategic advantage
Uniqueness perceived Low cost positionBroad
industry wide Differentiation
Strategic target
Narrow
specific segmentFocused
differentiationFocused
cost leadershipOverall
cost leadershipFigure 8.2
Competitive
advantage (Source:
Adapted from
Porter, 1980)
Cost leadership
One potential source of competitive advantage is to seek an overall cost
leadership position with an industry, or industry sector. Here the focus of
strategic activity is to maintain a low cost structure. The desired structure
is achievable through the aggressive pursuit of policies such as controlling
overhead cost, economies of scale, cost minimisation in areas such as
marketing and R&D, global sourcing of materials and experience effects.
Additionally, the application of new technology to traditional activities
offers significant opportunity for cost reduction.
Difficulties can exist in maintaining cost leadership. Success can attract
larger, better resourced competitors. If market share falls, economies of
scale become harder to achieve and fixed costs, such as overheads, are dif-
ficult to adjust in the short-to-medium term. Additionally, cost leaderships