Michael Porter wrote in his book Competitive Strategies three strategies firms must adopt-

Cost Leadership, Differentiation, or Focus. These are known as Porter's three generic
strategies and can be applied to any size or form of business. Porter claimed that firms must
choose any of these three strategies.

The Cost Leadership Strategy: It is all about minimizing the cost of delivering products or
services. It involves firms gaining market share by appealing to price-sensitive customers. This is
realized by having the lowest prices in the target market segment.

The Differentiation Strategy: Differentiation comprises making products and services

different and more appealing than the offerings of competitors. A differentiation strategy works
best where the target customer is not price-sensitive, the market is competitive or saturated and
customers have very specific needs which are currently not being served.

The Focus Strategy: Firms focus on particular niche markets and by understanding the needs
of the customer develop products.

Both Cost Leadership and Differentiation: It is possible for firms to follow a two generic
strategies like cost leadership and differentiation at the same time but it is very rare. It is only
possible when

 Competitors are stuck in the middle

 The business initiates a major invention
 Cost is strongly determined by market share or interrelationships

Some examples of companies are

1. XXX
2. X
3. x
4. x
5. x

Neither Cost Leadership and nor Differentiation: Some businesses offer neither Cost
leadership, nor differentiated products and are Stuck in the Middle of generic strategies. It
happens when business managers think they can do both or don’t know what they have to
do.

Some examples of companies are

1. XXX
2. X
3. x
4. x
5. x