Rating

9

Qualities

  • Innovative
  • Applicable

Recommendation

This seminal book is a classic and ought to be read by anyone in business. Michael E. Porter's ideas on competitiveness have lost little relevance despite the fact that he first advanced them in this book in 1980. They have now become so much a part of business practice and business language that one reads the book more with a sense of recognition than a sense of discovery. His prose style is clear and straightforward, albeit somewhat plodding, and the book can tend to repeat itself. However, Porter's clarity is a welcome change from the murk you encounter in many other books on business strategy, and his repetition serves a useful pedagogical purpose. getAbstract highly recommends this excellent book. If you're in business, it's relevant.

Summary

Competitive Forces

A company's competitive strategy must depend on its environment, most immediately the environment of its industry.

The competitive situation in an industry is a function of five basic factors:

  • The relative power of suppliers.
  • The level of threat from potential new industry participants.
  • The relative power of customers.
  • The level of threat from potential substitutes for the product or service.
  • The degree of competition among current industry participants.

Competition reduces the return on capital to the sum of the risk-free rate and the risk of losing capital. All five of the above factors contribute to the competitive dynamic of any industry, though any single factor's level of importance varies from industry to industry.

Competitive strategy means taking action to gain a position of strength in your industry, and being able to defend that position successfully against all five forces.

Becoming a Strong Competitor

Generally speaking, pursue one of these three approaches to achieve competitive excellence:

  1. Establish superior efficiency and cost effectiveness...

About the Author

Michael E. Porter is the C. Roland Christensen Professor of Business Administration at the Harvard Business School. He has received the Wells Prize in Economics, the Adam Smith Award, three McKinsey Awards and numerous other honors.


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