A successful integration strategy requires that trade-offs between differentiation and
low cost are reconciled. This is often difficult because differentiation and low cost are
distinct strategic positions that require the firm to effectively manage internal value chain activities that are fundamentally different from one another. For example, a cost leader would focus research and development on process technologies in order to improve efficiency, but a differentiator would focus research and development on product technologies in order to add uniqueness. When successful, investments in differentiation and low cost are not substitutes but are complements, providing important spill-over effects. An integration strategy allows a firm to offer a differentiated product or service at low cost.
Exhibit 6.8 shows how a successfully formulated integration strategy combines both a differentiation and low-cost position. Exhibit 6.8 also shows the consequence of an integration strategy gone bad—the firm ends up being “stuck in the middle,” meaning the firm has neither a clear differentiation nor a clear cost-leadership profile. We discuss the potential pitfalls of an integration strategy in detail next.