Editing Porter's generic strategies (section)

==Origin==
Empirical research on the [[profit impact of marketing strategy]] indicated that firms with a high market share were often quite profitable, but so were many firms with low market share. The least profitable firms were those with moderate market share. This was sometimes referred to as the hole in the middle problem. Porter's explanation of this is that firms with high market share were successful because they pursued a cost leadership strategy and firms with low market share were successful because they used [[market segmentation]] to focus on a small but profitable market niche. Firms in the middle were less profitable because they did not have a strategy.

Porter suggested that combining multiple strategies is successful in only one case. Combining a market segmentation strategy with a product differentiation strategy was seen as an effective way of matching a firm's [[product strategy]] (supply side) to the characteristics of your target market segments (demand side). But combinations like cost leadership with product differentiation were seen as hard (but not impossible) to implement, due to the potential for conflict between cost minimization and the additional cost of value-added differentiation.

Since that time, empirical research has indicated companies pursuing both differentiation and low-cost strategies may be more successful than companies pursuing only one strategy.<ref>Wright, Peter, Kroll, Mark, Kedia, Ben, and Pringle, Charles. 1990. Strategic Profiles, Market Share, and Business Performance. Industrial Management, May 1, pp23-28.</ref>

Some commentators have made a distinction between cost leadership, that is, low cost strategies, and best cost strategies. They claim that a low cost strategy is rarely able to provide a [[sustainable competitive advantage]]. In most cases firms end up in [[price wars]]. Instead, they claim a best cost strategy is preferred. This involves providing the best value for a relatively low price.