Obtaining a Competitive Advantage Through Cost Leadership and Differentiation

This assignment will cover how a business can gain a competitive advantage over similar businesses in the same market using sources such as cost advantage and differentiation. What will also be discussed is the value chain model made by Porter, and this assignment will explain what the model was actually designed for. Furthermore, it will be explained how a business can use methods of competitive advantage through various stages of Porter’s Value Chain in order to help it maintain and increase the competitiveness of the business, and this will be done through assessing the operations of the business and locating exactly where any competitive advantage can be gained. Lastly, Porter’s value chain features 9 activities which can each be identified as being either a primary or support activity and what will then be explained will be how these primary and support activities can add value to a business, and whether or not support activities can be considered as being any more or any less important than a primary activity.

It is suggested by many that there are two ways for a business to gain competitive advantage; this is done through either cost advantage or differentiation. Porter (2004, p.64) claims that cost advantage is when a “firm achieves a lower cumulative cost of performing value activities than its competitors”. A good example of this would be ASDA within the food retailer industry. ASDA (ASDA beats its full year sales and profit plan, 2009), known for their “commitment to everyday low prices”, are very much a cost-leading competitor in the food retailer industry and they stated that they beat their “full year sales and profit plan” for the fourth consecutive quarter in 2009 by introducing a “significant cost reduction prog...

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