When working through B2B marketing strategy and planning issues it is all too easy to get bogged down in detail and miss the overall picture. Although there are some problems with generic strategies (discussed below) Porters competitive strategies do deliver a useful starting point.
Porter stated there were three basic ways a business can achieve a sustainable competitive advantage as follows:
- Cost leadership
He also argued businesses need to avoid implementing parts of one or more of the above and to make a firm decision on a single route to follow.
Provided a business can maintain industry standard pricing then if it can achieve overall cost leadership it will be among the better performers in its market segment. Cost leadership is based on taking every opportunity to drive out cost to become the lowest cost producer in the market.
As the name implies a differentiation strategy is based on delivering a unique offering of real value to buyers. Differentiation involves charging a premium price and, assuming costs are under control, businesses that successfully employ this tactic are above average performers. To be a success the offer must deliver distinct advantages over anything else in the marketplace.
Finally, a focus strategy is based on selecting a few market sectors (excluding all others) and delivering a specific offering of interest to those specific segments alone. The offering may be based on cost leadership or differentiation.
Each of the above marketing strategies is too simplistic to be applied in its pure form in a real world situation but they are a useful starting point when preparing a marketing plan for a business. If it is not practical (or desirable) for a business to follow the cost leadership route then the focus must be on the other two. This process narrows down the options available to a business.