Fundamentally, the risks in pursuing the Porters generic competitive strategies are two: first, failing to attain or sustain the strategy; second, for the value of the strategic advantage provided by the strategy to erode with industry evolution. More narrowly, the three strategies are predicated on erecting differing kinds of defenses against the competitive forces, and not surprisingly they involve differing types of risks. It is important to make these risks explicit in order to improve the firm’s choice among the three alternatives.
Risks of Overall Cost Leadership StrategyCost leadership imposes severe burdens on the firm to keep up its position, which means reinvesting in modern equipment, ruthlessly scrapping obsolete assets, avoiding product line proliferation and being alert for technological improvements.… Read the rest