Competitive Advantage Framework

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Definition: Competitive Advantage Framework

Porter suggests that there can be broadly 3 different ways to achieve competitive advantage.

Cost Leadership – A company prices its products lower than the other competitor products available in the market. However, these low prices should not cause loss to the company and should be sustainable. If other companies also decrease their prices, the price war can be disastrous.

Differentiation – A company differentiates its product from other. In this case, it can charge a premium over other products and gain profits.

Focus – In this strategy, the company focuses on a particular/niche segment and uses the cost leadership or differentiation in that segment.


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