Elements of business-level strategy

For the last several decades strategy scholars have tried to understand what determines firm performance. The basic premise is that something that firms do or have done in the past gives them a competitive advantage that results in superior performance. In essence, a firm's strategy presumably defines what the firm does, which may generate a somewhat unique competitive advantage that results in superior performance. Though there has been much debate about the planned or emergent nature of a firm's strategy, we are now interested only in the content of the strategy rather than its formation process. It seems reasonable for researchers to try to categorize the different strategies that firms may follow in their own industry and to explore which ones may provide superior performance.

Unfortunately, the search for a solid categorization of firm strategies across different industries has not been very successful, particularly with regard to their implications for performance. Michael Porter's categorization of three generic business strategies has been the most influential in the field. As discussed in chapter four, firms may follow either a cost leadership or a differentiation strategy, but if they try to achieve both, they may end up stuck in the middle with lower than average performance; as a third alternative, a focus strategy within a narrow segment of the market may define the strategy, alongside one of the two basic options.