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continued focus, we expect to continue growing faster than the industry and increase
[1]
our revenue, profitability and cash flow for greater shareholder value.”
Dell provides an excellent example of what is meant by strategic focus. This
spirit of focus is echoed in the following two parts of this section where we introduce

you to the complementary notions of strategy as trade-offs and strategy as discipline.
Strategy as Trade-Offs
Three of the most widely read books on competitive analysis in the 1980s were
Michael Porter’s Competitive Strategy, Competitive Advantage, and Competitive
[2]
Advantage of Nations. In his various books, Porter developed three generic
strategies that, he argues, can be used singly or in combination to create a defendable
position and to outperform competitors, whether they are within an industry or across
nations. The strategies are (1) overall cost leadership, (2) differentiation, and (3)
focus on a particular market niche.
Cost Leadership, Differentiation, and Scope
These strategies are termed generic because they can be applied to any size or
form of business. We refer to them as trade-off strategies because Porter argues that a
firm must choose to embrace one strategy or risk not having a strategy at
all. Overall lower cost or cost leadership refers to the strategy where a firm’s
competitive advantage is based on the bet that it can develop, manufacture, and
distribute products more efficiently than competitors. Differentiation refers to the
strategy where competitive advantage is based on superior products or service.
Superiority arises from factors other than low cost, such as customer service, product
quality, or unique style. To put these strategies into context, you might think about
Wal-Mart as pursuing a cost-leadership strategy and Harley Davidson as pursuing
a differentiation strategy
Porter suggests that another factor affecting a company’s competitive position
is its competitive scope. Competitive scope defines the breadth of a company’s target
market. A company can have a broad (mass market) competitive scope or a narrow
(niche market) competitive scope. A firm following the focus strategyconcentrates on
meeting the specialized needs of its customers. Products and services can be designed
to meet the needs of buyers. One approach to focusing is to service either industrial
buyers or consumers but not both. Martin-Brower, the third-largest food distributor in
the United States, serves only the eight leading fast-food chains. It is the world’s
largest distributor of products to the world’s largest restaurant company—
McDonald’s. With its limited customer list, Martin-Brower need only stock a limited
product line; its ordering procedures are adjusted to match those of its customers; and
its warehouses are located so as to be convenient to customers.
Firms using a narrow focus strategy can also tailor advertising and promotional
efforts to a particular market niche. Many automobile dealers advertise that they are
the largest volume dealer for a specific geographic area. Other car dealers advertise
that they have the highest customer satisfaction scores within their defined market or
the most awards for their service department.
Another differentiation strategy is to design products specifically for a
customer. Such customization may range from individually designing a product for a
single customer to offering a menu from which customers can select options for the

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