ACCA Applied Knowledge · Business and Technology · Competitive factors
Which of the following best describes the risk of being 'stuck in the middle' in Porter's analysis?
Being stuck in the middle means a firm tries to be both low-cost and differentiated but achieves neither, so it earns below-average returns. A narrow-segment focus is a legitimate strategy and is not what Porter meant by this risk.
- AA firm that pursues both cost leadership and differentiation without achieving either, resulting in below-average returnsCorrect
- BA firm that operates in only one narrow market segment and so faces a limited customer base
- CA firm whose supply chain is located between suppliers and distributors and so lacks bargaining power
- DA firm that has diversified into unrelated markets and so lacks a clear core business
Explanation
Porter argued that firms failing to commit to one generic strategy end up with neither the low costs of a cost leader nor the distinctiveness of a differentiator, giving poor performance. The narrow segment option describes focus, which is a valid strategy, not being stuck in the middle.
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