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a broad scope (mass-market) or with a narrow scope (niche). This is not a new strategy but rather a way the competitors decide to approach the cost leadership and differentiation strategies. Therefore it can be possible to observe broad-scope or narrow-scope cost leadership strategy, as well as broad-scope or narrow-scope differentiation strategy. Porter states that these strategies, if not well executed, won’t be profitable and the company undertaking them will be “stuck in the middle” (Porter, 1980) of two distinguished strategic paths. These three strategies are called the “three generic strategies” and they are also graphically illustrated in the following figure. Figure 1: The three generic strategies
12[Source: tatler.typepad.com] Another framework used in this section is the one of the possible outcomes of a differentiation strategy. These outcomes are: vulnerable competitive advantage; successfully built competitive advantage; competitive advantage halfway realized; failed attempt of differentiation. They are realized depending on the ability of the firm to both create unique value with regard to specific customers or specific needs and efficiency under a costs perspective (Invernizzi, 2008, p.170). In order to complement the formerly mentioned concepts of competitive advantage, they will be integrated with the book “Good Strategy Bad Strategy” by Richard Rumelt. According to a principal stated in the book, “no one has an advantage at everything” (Rumelt, 2011, p.161) therefore, in order to properly use the advantage, one must only “press where you have advantages” (ibid.) and avoid competing where you do not have an advantage. To put it in Rumelt’s words, “you must exploit your rivals’ weaknesses and avoid leading your own” (ibid.). This consideration will be discussed and framed using a theory illustrated in “Good Strategy Bad Strategy” of “value-creating changes” (Rumelt, 2011, p.169). An advantage, in order to be valuable, it has to be sustainable and to be sustainable it must be increased in its value. This theory states that “increasing value requires a strategy to progress on at least one of four different fronts” (ibid.): deepening advantage; broadening the extent of the advantage; creating higher demand for advantaged product or services; strengthening the isolating mechanisms that block easy replication and imitation by competitors. In the paper “Strategy and Organizational Evolution”, H. A. Simon uses the term “comparative advantage” as a synonym of “niche”. Simon shows how a company can
13successfully switch from a position of advantage to the other, in an uncertain environment, through an appropriate strategic decision process. Moreover, an important concept is provided in the paper and it states that “the most important skills required for survival and success in the kind of uncertain, rapidly evolving world in which we live are” (Simon, 1993, p.134): skills in anticipating the shape of an uncertain future; skills in generating alternatives for operating effectively in changed environments; skills in implementing new plans rapidly and efficiently.