There are two “generic” competitive strategies for outperforming other organizations in a particular industry:

• lower cost and
• differentiation.

Lower cost refers to your institution’s ability to develop and market comparable programmes and services more efficiently than your competitors. Differentiation, in contrast, is the ability to provide unique or superior value to clients in terms of programme/service quality, special features and know-how, or customer service. These strategies are called generic because any type or size of institution can pursue them.

In addition, your institution’s competitive advantage in your industry is determined by its competitive scope (=the breadth of your target market). Before using one of the two generic competitive strategies (lower cost or differentiation), your institution must be clear about its target group and the range of programmes/services offered, how it will deliver these services and the geographic areas in which it will offer these services. These determinations should reflect an understanding of the organization’s unique resources. Simply put, an organization can choose a broad target market or a narrow target market (=market niche).

Combining these two types of target markets with the two competitive strategies results in four variations of generic strategies depicted below:

	LOWER COST	DIFFERENTIATION
BROAD TARGET	Cost Leadership	Differentiation
NARROW TARGET	Cost Focus	Focused Differentiation

 

When the lower cost and differentiation strategies have a broad mass-market target, they are simply called cost leadership and differentiation. When they are focused on a niche market however, they are called cost focus and focused differentiation.

Source: The Competitive Advantage of Nations, by Michael E. Porter. The Free Press 1990.