It establishes a defendable position in a market so that the business can outperform rivals.

Risks associated with competitive strategies

Each competitive tactic entails specific dangers. Competitors might copy a company's cost leadership strategy, for instance, particularly if customers place little value on product differentiation. In some segments of the market, it's possible that the axis' cost and degree of differentiation put them ahead of their rivals. However, if demand declines or as customers place less emphasis on product features, they will turn over the supply of competition to businesses that have kept an eye on all markets.

Competitive strategy issues

Michael Porter belives that in order to succeed, a firm or business unit must employ one of the two competing strategies—lower costs or differentiation—or else it would remain at the average level of the competitive market without a competitive advantage and see a gradual decline in performance. It will perform worse than usual.