A2.4.2 Competitive Advantage


Porter identified two separate and fundamental sources of competitive advantage:

  • a lower relative cost advantage
    • i.e. being cheaper


  • some form of differentiation
    • e.g. standing out from the crowd, by say not testing on animals, having a call centre based in the UK, using less packaging, being made from recycled items etc.


The focus of Porter’s argument is that the achievement of this competitive advantage will depend on all the discrete activities that a company undertakes. If you look at the activities in strategically relevant” groups, you will be able to understand the behaviour of costs as well as identify existing or potential sources of differentiation.