According to various startup statistics, there are over 150 million startups worldwide as of 2025. All these companies surely have one common question in mind, “How can my company stand out and succeed in a competitive market?”

This question is exactly what Michael Porter tried to solve through his framework, the Porter’s Generic Strategy, a widely used strategy that can be applied to any company in the industry. According to Porter, trying to master everything is not a guarantee to success. Instead, a company must pick one clear path, from the three generic strategies–cost leadership, differentiation, and focus strategy–to build its competitive edge.

  1. Cost Leadership Strategy

This strategy means that the company will try to become the lowest-cost producer in the market, without sacrificing too much on the quality of its product. This strategy is often used to produce good or services that are cheaper than its competitors, with the goal to attract more customers by offering lower prices or to maintain average prices but gain a higher profit margin.

Companies that adopt this kind of strategy include, stores like Indomaret or Alfamart. These convenience store chains focus on cost-efficient operations with large-scale procurement. The strategy involves opening numerous outlets in both urban and rural areas, to minimize costs per unit through the economies of scale. Another prominent characteristic is that they often compete based on price and accessibility to appeal price-sensitive customers.

Usually, this strategy is adopted by companies that focus on cost control, supply chain optimization, and standardization. The employees here are often required to follow discipline routines to reduce waste and maximize productivity.

  1. Differentiation Strategy

Company adopting the differentiation strategy usually offers unique and valuable products that customers are willing to pay more for. This could be achieved through its design, technology, customer service, brand reputation, or experience. The goal of this strategy is to create something their competitors cannot easily copy.

Examples of the implementation of this strategy can be seen in Apple, Tesla, or Starbucks. These brands create products that are instantly recognizable by people and often set the trend, instead of following an existing trend.

In order to apply this strategy successfully, the company needs to prioritize creativity, innovation, and have a strong brand culture. Employees need to understand about the value that they can deliver and not just “do their job.”

  1. Focus Strategy

This strategy means targeting a specific segment of the market, instead of appealing to everyone. The focus strategy can be further broken down into two types, cost focus and differentiation focus. Similar to the two other strategies, cost focus means to be the lowest-cost provider for a specific group. Meanwhile, differentiation focus means to offer a unique product for the chosen market segment.

For example, Mr. DIY is a store targeting mainly budget-conscious individuals looking for affordable household tools, accessories, and everyday needs. This store focuses on a niche market of people who want low-priced functional items and doesn’t sell any premium products. Meanwhile, a brand with differentiation focus is those like Rolls-Royce. This brand focus on a specific niche of customers who value prestige, exclusivity, and craftsmanship. Each car can be custom-built and its production is limited.

Companies with this strategy must have deep understanding of their niche and is adaptive to the needs of the chosen customer segment. Additionally, this strategy usually causes companies to gain closer customer relationships, yet they will need more specialized teams.

One last state in this framework is known as “stuck in the middle.” This is a situation where a business tries to do everything and ends up not doing well in any of it. For example, it is difficult for a company to try to be the cheapest and the most luxurious brand. This is because the cost of luxury is not something that can be covered with low price. Another example is like buying a ticket for a budget airline, but expecting a five-star airline service.

Hence, it is very important for a company to understand very well its needs and goals, in order to know what strategy to adopt. Being selfish and trying to fulfill every competitive advantage will just lead to the downfall of a company, and is something to be avoided.