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Porter's Generic Strategies

L1StrategyCompetitive advantagedecisionStages 2 to 5

Reference model

Porter’s generic strategiesA two-by-two grid. Columns are the source of competitive advantage, lower cost or differentiation; rows are competitive scope, a broad target or a narrow one. The squares are cost leadership, differentiation, cost focus and differentiation focus. A band below the grid warns of being stuck in the middle.COMPETITIVE ADVANTAGELOWER COSTDIFFERENTIATIONCOMPETITIVE SCOPEBROAD TARGETNARROW TARGETCost leadershipThe lowest cost across the whole market.Scale · learning curve · tight cost controlDifferentiationSomething unique that buyers pay more for.Quality · design · brand · serviceCost focusThe lowest cost in one chosen segment.A narrow base served more cheaplyDifferentiation focusOne segment’s special needs, met best.Specialist fit no broad rival matchesStuck in the middleNo clear choice — the lowest returns of all

Two choices define the four strategies: how you win (lower cost or differentiation) and how wide a market you serve (broad or narrow).

About this model

Porter argues that to earn above-average returns a business must choose how it will win: lowest cost, or differentiation, and across a broad market or a narrow segment. A business with no clear choice is “stuck in the middle” and earns the least.

Michael E. Porter — Competitive Strategy · 1980

How to read it

  • Pick one square: the source of your advantage (lower cost, or something buyers value enough to pay more for) and the scope you serve (the whole market, or one segment).
  • Each square needs different capabilities and a different organisation; trying to be best at cost and at differentiation across the whole market usually means being neither.
  • Test the choice against the Five Forces: a good position defends you against the strongest force.

What this does

Forces a choice of competitive stance — cost leadership, differentiation, or focus — since trying to be all three at once usually means being none of them well.

When to use it

Early Growth through Maturity, once Porter's Five Forces has clarified industry structure and a clear stance needs committing to.

What happens next

The chosen stance shapes the Business Model Canvas's Value Proposition and Cost Structure blocks.

Golden thread

Builds on ←

  • porter5

Feeds into →

  • bmc

Framework library: Strategy and environment (layer L1), lifecycle stages 2 to 5.

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Hand-built by Eccellere and reviewed by Eccellere on 02/11/2026. Guidance, not advice: apply your own judgement.