The purpose of this paper is to evaluate the applicability of Porter's model of generic strategies as applied toward online retailers following the United States Supreme Court's decision in Leegin, which appears to signal greater tolerance for minimum vertical price maintenance agreements.
The paper is based on a review of the literature and examines cases relating to minimum resale price maintenance agreements. Relying heavily on Porter's framework, it explores the strategic implications of the recent decision in Leegin for on‐line retailers, many of whom rely on a cost leadership competitive advantage.
Since the increased likelihood that vertical minimum price maintenance agreements will be permitted, thereby lowering the barriers to entry, online retailers may be deterred from utilizing low costs to under‐price traditional retailers. As a result, the Leegin holding has devalued the feasibility of pursuing a cost leadership strategy, and e‐tailers may need to adopt alternative or integrative strategies for securing a competitive advantage.
The paper incorporates literature pertaining to Porter's model of generic strategies, online pricing strategies, as well as recent court cases.
