While many firms strive for a competitive advantage, but few truly understand what it is or how to achieve and keep it and a competitive advantage can be gained by offering the consumer a greater value than the competitors, such as by offering lower prices or providing quality services or other benefits that justify a higher price. The argument by Michael Porter is that if a firm is neither a differentiator not the cost leader, it is often called ‘stuck in the middle’ and may suffer from competitive disadvantage when being ‘stuck in the middle is supported by Dess Lumpkin & Elsner (2007) who in addition state that a firm will either focus on a low cost or a differentiation strategy. They go onto say that the success will be to hold down cost or become more efficient in the use of their resources and companies can adapt different strategies to give themselves a competitive advantage in the global business world.
Whilst Gordon Walker argues that “ultimately, the difference between value and cost, not their level, relative to competition, determines superior market position and competitive advantage is not about differentiation or cost leadership and it is about producing and then protecting a greater economic contribution than rivals”, (Walker, 2007, p. 31.).
With Michael Porter’s warning it can be argued that a firm will have a hard time competing for market share if a customer is cost sensitive and a firm’s product is high in value then they may need to keep reducing cost to compete. This will mean that the SIM firm will be forced to lower there profit margin or cost price to compete with other competitors. Additionally if a firm has a product that has a perception of high value then the firm that is stuck in the middle will have a hard time making a ...