Competitive Advantage [Hardcover]

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

'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 this book. It is a very useful introduction into activities within businesses and is written in simple US-English.

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.