According to Porter, strategies allow organizations to gain competitive advantage from three different bases: cost leadership, differentiation, and focus. Porter calls these bases as generic strategies.

Cost leadership emphasizes producing standardized products at a very low per-unit cost for consumers who are price-sensitive.

Differentiation is a strategy aimed at producing products and services considered unique industry wide and directed at consumers who are relatively price-insensitive.

Focus means producing products and services that fulfill the needs of even small groups of consumers who are in need of distinctive services.

Porter stresses the need for strategists to perform cost-benefit analyses to evaluate “sharing opportunities” among a firm's existing and potential business units. Sharing activities and resources enhances competitive advantage by lowering costs or raising differentiation.

In addition to promoting sharing, Porter stresses the need for firms to “transfer" skills and expertise among autonomous business units effectively in order to gain competitive advantage. Depending upon factors such as type of industry, size of firm and nature of competition, various strategies could yield advantages in cost leadership differentiation, and focus.