There are two fundamentally different generic business strategies— differentiation and cost
leadership. A differentiation strategy seeks to create higher value for customers than the
value that competitors create, by delivering products or services with unique features while
keeping costs at the same or similar levels. A cost-leadership strategy , in contrast, seeks
to create the same or similar value for customers by delivering products or services at a
lower cost than competitors, enabling the firm to offer lower prices to its customers.
These two strategies are called generic strategies because they can be used by any
organization—manufacturing or service, large or small, for-profit or nonprofit, public or
private, U.S. or non-U.S.—in the quest for competitive advantage, independent of industry
context. Differentiation and cost leadership require distinct strategic positions in order
to increase a firm’s chances to gain and sustain a competitive advantage. 5 Because value
creation and cost tend to be positively correlated, there exist important trade-offs between
value creation and low cost.
There are two fundamentally different generic business strategies— differentiation and cost
leadership. A differentiation strategy seeks to create higher value for customers than the
value that competitors create, by delivering products or services with unique features while
keeping costs at the same or similar levels. A cost-leadership strategy , in contrast, seeks
to create the same or similar value for customers by delivering products or services at a
lower cost than competitors, enabling the firm to offer lower prices to its customers.
These two strategies are called generic strategies because they can be used by any
organization—manufacturing or service, large or small, for-profit or nonprofit, public or
private, U.S. or non-U.S.—in the quest for competitive advantage, independent of industry
context. Differentiation and cost leadership require distinct strategic positions in order
to increase a firm’s chances to gain and sustain a competitive advantage. 5 Because value
creation and cost tend to be positively correlated, there exist important trade-offs between
value creation and low cost.
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