According to Michael Porter, management must select a competitive strategy that will give
it a distinct advantage by capitalizing on the strengths of the organization and the industry
it is in. He has argued that a firms strengths ultimately falls into either cost advantage or
differentiation, which applied either broadly or narrowly results in three generic strategies:
cost leadership, differentiation, and focus. They are called generic strategies because they
are not firm or industry dependent and are applied at the business unit level.
The first generic strategy is cost leadership, a strategy which strongly emphasizes working
towards a unified goal of a lower-priced product.
With this strategy, the objective is to become the lowest-cost producer in the industry. An
example of a company following cost leadership is Southwest Airlines.
According to a recent SWOT Analysis done on Southwest Airlines, their current strategy is
to position themselves as a cost leadership with a focus strategy. Within their company
mission it states they aim to cost-effectively and reliably fly large number of customers on
short, non-stop flights. They truly are committed to making flying available to everyone.
According to the SWOT Analysis some of their strengths include maintaining operating
expenses per available seat mile at 15-20% below average, all their aircraft
maintenance, turnaround, and training costs are contained, and they have a no meals, no
central reservations, and no assigned seats. Southwest Airlines has experienced nothing but
strong growth and profitability by following the cost-leadership strategy.
A differentiation strategy calls for the development of a product or service that offers
