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monitor the incremental costs of differentiating their product and make certain the
difference is reflected in the price.
Firms pursuing a differentiation strategy are vulnerable to different competitive
threats than firms pursuing a cost-leader strategy. Customers may sacrifice features,

service, or image for cost savings. Price-sensitive customers may be willing to forgo
desirable features in favor of a less costly alternative. This can be seen in the growth
in popularity of store brands and private labels. Often, the same firms that produce
name-brand products produce the private-label products. The two products may be
physically identical, but stores are able to sell the private-label products for a lower
price because very little money was put into advertising to differentiate the private-
label product.
Imitation may also reduce the perceived differences between products when
competitors copy product features. Thus, for firms to be able to recover the cost of
marketing research or R&D, they may need to add a product feature that is not easily
copied by a competitor.
A final risk for firms pursuing a differentiation strategy is changing consumer
tastes. The feature that customers like and find attractive about a product this year
may not make the product popular next year. Changes in customer tastes are
especially obvious in the fashion industry. For example, although Ralph Lauren’s
Polo has been a very successful brand of apparel, some younger consumers have
shifted to Tommy Hilfiger and other youth-oriented brands.
For a variety of reasons, including the differences between intended versus
realized strategies discussed in an earlier section, none of these competitive strategies
is guaranteed to achieve success. Some companies that have successfully
implemented one of Porter’s generic strategies have found that they could not sustain
the strategy. Several risks associated with these strategies are based on evolved
market conditions (buyer perceptions, competitors, etc.).
Straddling Positions or Stuck in the Middle?
Can forms of competitive advantage be combined? That is, can a firm straddle
strategies so that it is simultaneously the low-cost leader and a differentiator? Porter
asserts that a successful strategy requires a firm to stake out a market position
aggressively and that different strategies involve distinctly different approaches to
competing and operating the business. Some research suggests that straddling
strategies is a recipe for below-average profitability compared to the industry. Porter
also argues that straddling strategies is an indication that the firm’s managers have
not made necessary choices about the business and its strategy. A straddling strategy
may be especially dangerous for narrow scope firms that have been successful in the
past, but then start neglecting their focus.
An organization pursuing a differentiation strategy seeks competitive
advantage by offering products or services that are unique from those offered by
rivals, either through design, brand image, technology, features, or customer service.
Alternatively, an organization pursuing a cost-leadership strategy attempts to gain
competitive advantage based on being the overall low-cost provider of a product or
service. To be “all things to all people” can mean becoming “stuck in the middle”
with no distinct competitive advantage. The difference between being “stuck in the

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