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Competitive Advantage: Creating and Sustaining Superior Performance

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Michael Porter is the founding father for strategies in a competitive context. This pioneering book represents some of his best thoughts on business and corporate strategy.

Chapter 1 is a summary of his first landmark book - "Competitive Strategy". So if you just want to buy one of his bestsellers, then buy "Competitive Advantage".

The book's most important contribution is the concept of the VALUE CHAIN. Today, you won't find an MBA who doesn't know this idea. This book gives you all the details on the value chain. And it even tells you exactly how the value chain is translated into his two generic strategies: Cost Leadership and Differentiation. Most strategy books devote a separate chapter to this idea. If you want to get a more than a superficial understanding of the value chain, you simply have to read Porter's book.

This book also gets to the core of how synergies are created and when diversification might work. Curiously, Porter chooses the term interrelationships for synergies (you know, a term for a nice idea that rarely occurred in practice...).

Being a business development manager, I have strategic thinking as part of my key areas. This book is still a reference guide for me. Obviously though, Porter's views cannot stand-alone.

If you're looking for critical views on Porter's ideas, then consider buying Hamel & Prahalad's "Competing for the Future" (1994) or Kim & Mauborgne's "Blue Ocean Strategy" (2005).

Beware: You have to read Porter's Harvard Business review article "What is Strategy" from 1996, if you want his own response to the critics.

Warning: You cannot work seriously with strategy without having understood Michael Porter's core concepts. And the superficial introduction by most - even advanced - strategy books won't make you competent enough to apply his ideas skilfully. Let me give you two examples:

COST STRUCTURE:
Most MBAs have learned about the value chain and cost structure analysis. But in real life I've seen very few who combine these two concepts proficiently. The real beauty in benchmarking cost structures is when you skilfully apply it to the value chain. This book tells you exactly how to do this. In practice, I've seen this approach applied very few times (except advanced strategy consultants). It may be because people often use Porter's concepts too casually...

COST DRIVERS:
Most strategy books are on drivers of differentiation - the preferred strategy choice by management gurus. And Porter does indeed help you on this issue. More importantly, this book is one of the few to tell you about the cost drivers. How many books have you read on Cost Leadership? Porter elaborates on 10 cost drivers, such as economies of scale, learning, linkages, synergies, pattern of capacity utilization, integration, timing, policies, and location.

STRATEGY IS ABOUT BEING DIFFERENT. Start out personally by reading the real thing ... it's a bargain.

Peter Leerskov,
MSc in International Business (Marketing & Management) and Graduate Diploma in E-business

I just finished a competitive strategy class in my MBA program and this book was referred to often. The most helpful section is the one that breaks down a company's activities and helps create a 'value chain' to figure out how and where an organization creates value. Once this is done, Porter delineates how competitive advantages might be created based on tinkering with value chain activities. The only thing, I felt, was not covered in the book was the 'core competence' concept which is also derived from the value chain but ignored in this particular publication. Nevertheless, this is a 'must have' for all potential strategy consultants.

A comprehensive introduction to how you can create advantages in your industry, even if you're not an MBA-type and just an engineer (like me). It'll also give you a useful framework for assessing what your current company and group is doing, what its vulnerabilities are, and how it relates to what the rest of the market is doing so you can make recommendations.

The only downside was the dated feel of the examples, which really made it difficult for a younger person to relate to.

Michael Porter is a Harvard Business School professor and a leading authority on competition and strategy. This book builds on his initial 1980-book 'Competitive Strategy', which focuses on the industries surrounding businesses (summary of 'Competitive Strategy' is Chapter 1!). In this book, 'Competitive Advantage', Porter focuses on the business itself. The book is based on the activity-based theory of the firm. Activities are what generate cost and create value for buyers/customers, and are the basic units for competitive advantage.

'Competitive Advantage' consists of four parts - Principles of Competitive Advantage, Competitive Scope within an Industry, Corporate Strategy and Competitive Advantage, and Implications for Offensive and Defensive Competitive Strategy. Part I introduces the concept of the value, which is a general framework for thinking about the activities involved in any business and assessing their relative costs and role in differentiation. Then Porter explains the impact of the value chain on cost advantage, differentiation, technology and competitors. Part II discusses industry segmentation and substitution. Part III explains the interrelationships among business units and their impact on horizontal strategy, achievement of interrelationships, and complementary products. Part IV discusses industry scenarios under uncertainty, defensive strategy, and attacks on industry leaders.

Although some parts of the book are somewhat outdated, I would say that many modern management books are based on or around this book. This book provides through the use of the value chain a very useful introduction into activities within businesses. I recommend readers to complement this book with Michael Porter's 1996-Harvard Business Review-article 'What is Strategy?' which is available as a e-book (pdf-file) at Amazon.com. Highly recommended to anyone interested in management and business activities.

Mr. Porter's book did an excellent job in outlining all the key areas that matter in the real world. Mr. Porter takes you through the exercise of properly choosing strategies (price, differentiation, technology) while focusing on buyer values to create sustainable competitive advantages and barriers.

His outline of industry segmentation helps to keep readers focused on properly using capital to maximize earnings and competitive positions (a common mistake in the business world). I found the read most helpful in structuring a much more sound strategic plan for my own company. Thank you to Mr. Porter for providing such a wonderful strategic guide.

CEO Profit Line of America, Inc.

The book "Competitive Advantage" describes how a firm can gain an advantage over its rivals. Michael Porter introduced the concept of the "value chain" that breaks down a company into "activities" or the discrete functions or processes that represent the elemental building blocks of competitive advantage. Such discrete activities include order processing, producing products or services, training people, advertising or transporting goods. The value chain concept allows firms to isolate the underlying source of buyer value that will enable a firm to charge a premium price and explains the reasons why one product or service substitutes for another.

Competitive advantage is the key to a company's performance in competitive markets. This is very important in today's global markets when firms face global competition. The book explains how a firm can create and sustain a competitive advantage. It discusses the need for firms to effectively translate their broad competitive strategies into specific action steps required to gain competitive advantage. In particular, the book bridges the gap that many firms have between strategy formulation and implementation and treats the two subjects together.

Porter describes how a firm can put the three generic competitive strategies of cost leadership, differentiation and focus into practice. It highlights, for example, how a firm can differentiate itself from its rivals or how a firm can gain a cost advantage.

The book highlights the need for all the functions of an organization to play their role in creating competitive advantage. Production, marketing, finance, human resources and others all play essential roles for a firm in a combined and integrated way.

The book is critical reading for managers who play a part in a firm's strategy (that means all managers). Students studying strategic management will find the book very informative and easy to follow.

This is the second of the classic volumes by Michael Porter. The first was Competitive Strategy and it outlined the general methods and industry analysis. This volume, Competitive Advantage, is more complex and offers methods for understanding what a firm is and does and how it creates value. We all know the term value-chain; it was introduced here.

The complexity comes from trying to define firms when no two businesses (firms) are alike. Then add to that considerations about how do these firms compete with each other, to what degree, and in which ways?

The book is 15 chapters grouped in four parts. The four parts are:
1)Principles of Competitive Advantage
2)Competitive Scope Within an Industry
3)Corporate Strategy and Competitive Advantage
4)Implications for Offensive and Defensive Competitive Strategy

Chapter 15 is entitled "Attacking an Industry Leader". This is the culmination of the book and lets you know that it does have a practical focus. Of course, as a more practical book of theory (seems like an oxymoron, doesn't it?), it cannot discuss every situation or approach. Nevertheless, this is an important book. It not only deserves a place on every businessperson's shelf, it rewards careful reading and re-reading.
This is the second of the classic volumes by Michael Porter. The first was Competitive Strategy and it outlined the general methods and industry analysis. This volume, Competitive Advantage, is more complex and offers methods for understanding what a firm is and does and how it creates value. We all know the term value-chain; it was introduced here.

The complexity comes from trying to define firms when no two businesses (firms) are alike. Then add to that considerations about how do these firms compete with each other, to what degree, and in which ways?

The book is 15 chapters grouped in four parts. The four parts are:
1)Principles of Competitive Advantage
2)Competitive Scope Within an Industry
3)Corporate Strategy and Competitive Advantage
4)Implications for Offensive and Defensive Competitive Strategy

Chapter 15 is entitled "Attacking an Industry Leader". This is the culmination of the book and lets you know that it does have a practical focus. Of course, as a more practical book of theory (seems like an oxymoron, doesn't it?), it cannot discuss every situation or approach. Nevertheless, this is an important book. It not only deserves a place on every businessperson's shelf, it rewards careful reading and re-reading.

In his 1985 book titled Competitive Advantage: Creating and Sustaining Superior Performance Free Press 1985 Management and IT (information Technology) author Michael Porter set fourth some very useful ideas about creating competitive advantage with IT (e.g. building a strategically valuable system.) I've added an example or two after each of his points. They include:

(1) Building barriers to Entry (Microsoft Windows loaded on every new PC)
(2) Enhancing loyalty (American Hospital Supply on-line ordering)
(3) Favorably altering the balance of power with suppliers (American Airlines AAdvantage frequent flyer program)
(4) Changing the basis of competition within an industry (Federal Express hub & spoke delivery)
(5) Developing entirely new products (Finance and Insurance industries)

I believe this is very powerful stuff when thinking about the value of a new system proposal and in particular the inevitable 'build vs. buy decision'. It's also relevant to starting a new business and trying to find an approach that makes it unique!

A very timely book even after 20+ years!
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Many managers have a copy of this book on their book shelf - most have read the first 40-50 pages but no more. This is a shame (there is great value in the second half) but understandable as there are few examples and the text build on itself so working through the copy requires continual focus.

There are almost zero recorded applications of the entire value chain approach in the literature - either the results are too valuable or it is too difficult - I am not sure which one is the case.

My PhD is on the use of value chains which are realigned to how the customer values the results (in FMCG supermarkets) then how each precursive step can be then optimised to suit the customer value equation. It is almost a line of best fit as optimising one step always impacts on the other steps - just as Heisenberg said for managing both location and velocity of things.

Great book - read it from end to end or you will not get the true benefits. What it needs is a second book that brings the cases to life with real world examples - you will have to wait for my book for that bonus.

Michael Porter is the founding father for strategies in a competitive context. This pioneering book represents some of his best thoughts on business and corporate strategy.

Chapter 1 is a summary of his first landmark book - "Competitive Strategy". So if you just want to buy one of his bestsellers, then buy "Competitive Advantage".

The book's most important contribution is the concept of the VALUE CHAIN. Today, you won't find an MBA who doesn't know this idea. This book gives you all the details on the value chain. And it even tells you exactly how the value chain is translated into his two generic strategies: Cost Leadership and Differentiation. Most strategy books devote a separate chapter to this idea. If you want to get a more than a superficial understanding of the value chain, you simply have to read Porter's book.

This book also gets to the core of how synergies are created and when diversification might work. Curiously, Porter chooses the term interrelationships for synergies (you know, a term for a nice idea that rarely occurred in practice...).

Being a business development manager, I have strategic thinking as part of my key areas. This book is still a reference guide for me. Obviously though, Porter's views cannot stand-alone.

If you're looking for critical views on Porter's ideas, then consider buying Hamel & Prahalad's "Competing for the Future" (1994) or Kim & Mauborgne's "Blue Ocean Strategy" (2005).

Beware: You have to read Porter's Harvard Business review article "What is Strategy" from 1996, if you want his own response to the critics.

Warning: You cannot work seriously with strategy without having understood Michael Porter's core concepts. And the superficial introduction by most - even advanced - strategy books won't make you competent enough to apply his ideas skilfully. Let me give you two examples:

COST STRUCTURE:
Most MBAs have learned about the value chain and cost structure analysis. But in real life I've seen very few who combine these two concepts proficiently. The real beauty in benchmarking cost structures is when you skilfully apply it to the value chain. This book tells you exactly how to do this. In practice, I've seen this approach applied very few times (except advanced strategy consultants). It may be because people often use Porter's concepts too casually...

COST DRIVERS:
Most strategy books are on drivers of differentiation - the preferred strategy choice by management gurus. And Porter does indeed help you on this issue. More importantly, this book is one of the few to tell you about the cost drivers. How many books have you read on Cost Leadership? Porter elaborates on 10 cost drivers, such as economies of scale, learning, linkages, synergies, pattern of capacity utilization, integration, timing, policies, and location.

STRATEGY IS ABOUT BEING DIFFERENT. Start out personally by reading the real thing ... it's a bargain.

Peter Leerskov,
MSc in International Business (Marketing & Management) and Graduate Diploma in E-business