Competitive Advantage

Michael E. Porter, one of the world's leading authorities on competitive strategy and international competitiveness, is the C. Roland Christensen Professor of Business Administration at the Harvard Business School. In 1983, Professor Porter was appointed to President Reagan's Commission on Industrial Competitiveness, the initiative that triggered the competitiveness debate in America. He serves as an advisor to heads of state, governors, mayors, and CEOs throughout the world. The recipient of the Wells Prize in Economics, the Adam Smith Award, three McKinsey Awards, and honorary doctorates from the Stockholm School of Economics and six other universities, Porter is the author of fourteen books, among them Competitive Strategy, The Competitive Advantage of Nations, and Cases in Competitive Strategy, all published by The Free Press. He lives in Brookline, Massachusetts.

Financial Times The most influential management book of the past quarter century....A veritable goldmine of analytical concepts and tools to help companies get a much clearer grasp of how they can create and sustain competitive advantage.

• ContentsIntroductionPreface Chapter 1 Competitive Strategy: The Core ConceptsTHE STRUCTURAL ANALYSIS OF INDUSTRIESIndustry Structure and Buyer NeedsIndustry Structure and the Supply/Demand BalanceGENERIC COMPETITIVE STRATEGIESCost LeadershipDifferentiationFocusStuck in the MiddlePursuit of More Than One Generic StrategySustainability Generic Strategies and Industry EvolutionGeneric Strategies and Organizational Structure Generic Strategies and the Strategic Planning Process OVERVIEW OF THIS BOOKPART I PRINCIPLES OF COMPETITIVE ADVANTAGEChapter 2 The Value Chain and Competitive AdvantageTHE VALUE CHAINIdentifying Value ActivitiesDefining the Value ChainLinkages within The Value ChainVertical LinkagesThe Buyer's Value ChainCOMPETITIVE SCOPE AND THE VALUE CHAINSegment ScopeVertical ScopeGeographic ScopeIndustry ScopeCoalitions and ScopeCompetitive Scope and Business DefinitionThe Value Chain and Industry StructureTHE VALUE CHAIN AND ORGANIZATIONAL STRUCTUREChapter 3 Cost AdvantageTHE VALUE CHAIN AND COST ANALYSISDefining the Value Chain for Cost AnalysisAssigning Costs and Assets First Cut Analysis of CostsCOST BEHAVIORCost DriversThe Cost of Purchased InputsSegment Cost BehaviorCost DynamicsCOST ADVANTAGEDetermining the Relative Cost of CompetitorsGaining Cost AdvantageSustainability of Cost AdvantageImplementation and Cost AdvantagePitfalls in Cost Leadership StrategiesSTEPS IN STRATEGIC COST ANALYSISChapter 4 DifferentiationSOURCES OF DIFFERENTIATIONDifferentiation and The Value ChainDrivers of UniquenessTHE COST OF DIFFERENTIATIONBUYER VALUE AND DIFFERENTIATIONBuyer ValueThe Value Chain and Buyer ValueLowering Buyer CostRaising Buyer PerformanceBuyer Perception of ValueBuyer Value and the Real BuyerBuyer Purchase CriteriaIdentifying Purchase CriteriaDIFFERENTIATION STRATEGYRoutes to DifferentiationThe Sustainability of DifferentiationPitfalls in DifferentiationSTEPS IN DIFFERENTIATIONChapter 5 Technology and Competitive AdvantageTECHNOLOGY AND COMPETITIONTechnology and The Value ChainTechnology and Competitive AdvantageTechnology and Industry StructureTECHNOLOGY STRATEGY The Choice of Technologies to DevelopTechnological Leadership or FollowershipLicensing of TechnologyTECHNOLOGICAL EVOLUTIONContinuous Versus Discontinuous Technological EvolutionForecasting Technological EvolutionFORMULATING TECHNOLOGICAL STRATEGYChapter 6 Competitor SelectionTHE STRATEGIC BENEFITS OF COMPETITORSIncreasing Competitive AdvantageImproving Current Industry StructureAiding Market DevelopmentDeterring EntryWHAT MAKES A "GOOD" COMPETITOR? Tests of a Good Competitor"Good" Market Leaders Diagnosing Good Competitors INFLUENCING THE PATTERN OF COMPETITORSDamaging Good Competitors in Battling Bad Ones Changing Bad Competitors into Good OnesTHE OPTIMAL MARKET CONFIGURATIONThe Optimal Competitor Configuration Maintaining Competitor Viability Moving toward the Ideal Competitor ConfigurationMaintaining Industry Stability PITFALLS IN COMPETITOR SELECTIONPART II COMPETITIVE SCOPE WITHIN AN INDUSTRYChapter 7 Industry Segmentation and Competitive AdvantageBASES FOR INDUSTRY SEGMENTATIONStructural Bases For SegmentationSegmentation VariablesFinding New SegmentsTHE INDUSTRY SEGMENTATION MATRIXRelationships Among Segmentation VariablesCombining Segmentation MatricesINDUSTRY SEGMENTATION AND COMPETITIVE STRATEGYThe Attractiveness of a SegmentSegment Interrelationships Segment Interrelationships and Broadly-Targeted StrategiesThe Choice of FocusThe Feasibility of New Segments to Focus OnThe Sustainability of a Focus StrategyPitfalls and Opportunities for Focusers and Broadly-Targeted CompetitorsINDUSTRY SEGMENTATION AND INDUSTRYDEFINITIONChapter 8 SubstitutionIDENTIFYING SUBSTITUTESTHE ECONOMICS OF SUBSTITUTIONRelative Value/PriceSwitching CostsBuyer Propensity to SubstituteSegmentation and SubstitutionCHANGES IN THE SUBSTITUTION THREATSubstitution and Overall Industry DemandSubstitution and Industry StructureTHE PATH OF SUBSTITUTIONSegmentation and the Substitution PathSubstitution Forecasting ModelsSUBSTITUTION AND COMPETITIVE STRATEGYPromoting SubstitutionDefense Against SubstitutesIndustry Versus Firm Substitution StrategyPitfalls in Strategy Against SubstitutesPART III CORPORATE STRATEGY AND COMPETITIVE ADVANTAGEChapter 9 Interrelationships among Business UnitsTHE GROWING IMPORTANCE OF HORIZONTAL STRATEGYINTERRELATIONSHIPS AMONG BUSINESS UNITSTANGIBLE INTERRELATIONSHIPSSharing and Competitive AdvantageThe Costs of SharingDifficulty of MatchingIdentifying Tangible InterrelationshipsINTANGIBLE INTERRELATIONSHIPSCOMPETITOR INTERRELATIONSHIPSMultipoint Competitors in Unrelated IndustriesMultipoint Competition in Related IndustriesCompetitors with Different Patterns of InterrelationshipsForecasting Potential CompetitorsChapter 10 Horizontal StrategyTHE NEED FOR EXPLICIT HORIZONTAL STRATEGYFormulating Horizontal StrategyINTERRELATIONSHIPS AND DIVERSIFICATION STRATEGYDiversification Based on Tangible InterrelationshipsDiversification Through BeachheadsDiversification and Corporate ResourcesPITFALLS IN HORIZONTAL STRATEGYPitfalls in Ignoring InterrelationshipsPitfalls in Pursuing InterrelationshipsChapter 11 Achieving InterrelationshipsIMPEDIMENTS TO ACHIEVING INTERRELATIONSHIPSSources of ImpedimentsInterrelationships and EquityDifferences in Impediments among FirmsORGANIZATIONAL MECHANISMS FOR ACHIEVINGINTERRELATIONSHIPSHorizontal StructureHorizontal Systems Horizontal Human Resource Practices Horizontal Conflict Resolution ProcessesThe Corporate Role in Facilitating Interrelationships Interrelationships and the Mode of DiversificationMANAGING HORIZONTAL ORGANIZATIONPromising ExamplesJapanese Firms and InterrelationshipsA New Organizational FormChapter 12 Complementary Products and Competitive AdvantageCONTROL OVER COMPLEMENTARY PRODUCTSCompetitive Advantages From Controlling ComplementsProblems of Controlling ComplementsControl Over Complements and Industry EvolutionIdentifying Strategically Important ComplementsBUNDLINGCompetitive Advantages of BundlingRisks of BundlingBundled Versus Unbundled StrategiesBundling and Industry EvolutionStrategic Implications of BundlingCROSS SUBSIDIZATION Conditions Favoring Cross SubsidizationRisks of Cross SubsidizationCross Subsidization and Industry EvolutionStrategic Implications of Cross SubsidizationCOMPLEMENTS AND COMPETITIVE STRATEGYPART IV IMPLICATIONS FOR OFFENSIVE AND DEFENSIVE COMPETITIVE STRATEGYChapter 13 Industry Scenarios and Competitive Strategy under UncertaintyScenarios as a Planning ToolIndustry ScenariosCONSTRUCTING INDUSTRY SCENARIOSIdentifying Industry UncertaintiesIndependent Versus Dependent UncertaintiesIdentifying a Set of ScenariosConsistency of AssumptionsAnalyzing ScenariosIntroducing Competitor Behavior into ScenariosThe Number of Scenarios To AnalyzeAttaching Probabilities to ScenariosSummary Characteristics of Industry ScenariosINDUSTRY SCENARIOS AND COMPETITIVE STRATEGYStrategic Approaches Under ScenariosCombined and Sequenced StrategiesThe Choice of Strategy Under Industry ScenariosScenario Variables and Market IntelligenceSCENARIOS AND THE PLANNING PROCESSCorporate Role in Constructing Industry ScenariosIndustry Scenarios and CreativityChapter 14 Defensive StrategyTHE PROCESS OF ENTRY OR REPOSITIONINGDEFENSIVE TACTICSRaising Structural BarriersIncreasing Expected RetaliationLowering the Inducement for AttackEVALUATING DEFENSIVE TACTICSDEFENSIVE STRATEGYDeterrenceResponseResponse to Price CuttingDefense or DisinvestPitfalls in DefenseChapter 15 Attacking an Industry LeaderCONDITIONS FOR ATTACKING A LEADERAVENUES FOR ATTACKING LEADERSReconfigurationRedefinitionPure SpendingAlliances To Attack LeadersIMPEDIMENTS To LEADER RETALIATIONSIGNALS OF LEADER VULNERABILITYIndustry SignalsLeader SignalsATTACKING LEADERS AND INDUSTRY STRUCTUREBibliographyIndexAbout the Author