Does Competitive Strategy Work for Small Business?

The hypothesis is that the theory of competitive strategy developed by Michael E. Porter (1) is not useful as a strategic planning tool in small business. In small and medium-sized firms, the choice between overall cost leadership, overall differentiation and focus is really not an issue, since these firms only have the focus option. A new framework is introduced to allow small firms to classify themselves and their competitors as one of four generic firm types: prospector, defender, analyzer or reactor. An application of this framework to the Canadian electrical distribution industry is discussed.