Here is why I love Porter - Competitive Advantage
Micheal Porter (strategy professor at Harvard) states that CA can be achieved through either: Product differentiation or Cost leadership.Both have advantages and disadvantages. It depends on where you want to position your product. My interpretation is:
- go for product differentiation if you smaller sales volume but high contribution margin
- go for cost leadership if you want higher sales volume but low contribution margin
Sales volume can be controlled by other levers, such as marketing, price and so forth. However, how you price your product and how much you spend on marketing all affect contribution margin. Thus, CM is key.
Contribution margin is $$$ net of cost of goods sold and all other operating and selling expenses.
Basic business strategy, right? right! But here is why I love Porter...
I believe his CA model can be applied on youself in any situation in life, such as career, relationships, ...etc. If you think strategically, you have better chances of success.
Personally, I go for product differentiation. That is how i position myself - high quality, high price, high contribution margin. Cheap product may sell more, but guess who end up with more...cash. unless you got STUPID capacity, then go ahead, try to sell enough to make as much as me.
posted by SunShine @ 4:41 p.m.
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