On Competition
Collected HBR articles; expanded edition 2008
Summary
This collects Michael Porter's Harvard Business Review articles across two decades, and it is the most efficient way to get his framework without reading the three long books. The pieces are grouped into sections on competition and strategy, on clusters and regional competitiveness, and on competitive solutions to social problems.
The strategy material includes the original 1979 five forces article, the argument that operational effectiveness is not strategy, the treatment of strategy as making trade-offs and creating fit among activities, and the work on corporate strategy and diversification. The central claim throughout is that competitive advantage comes from performing different activities from rivals or performing similar activities differently, and that improvement on shared dimensions of performance produces convergence rather than advantage. Porter is explicit that a strategy must specify what the firm will not do.
The location material sets out the cluster concept: firms in related industries concentrated geographically benefit from specialised labour markets, supplier depth and knowledge spillovers, which is why competitive advantage is often local even in global industries. The later sections extend the framework to health care and to social issues, culminating in the shared value argument that Porter developed with Mark Kramer. The shared value work is the weakest and has been criticised for restating corporate social responsibility with a claim of novelty. Later editions add material; readers should check which they have.
Key takeaways 7
- Operational effectiveness is not strategy, because improvements available to everyone produce convergence rather than advantage.
- Strategy requires choosing what not to do, and a firm that makes no trade-offs has no strategy.
- Competitive advantage comes from a system of activities that fit together, which is harder to copy than any single activity.
- Industry structure, described by the five competitive forces, determines average profitability more than firm conduct does.
- Clusters of related firms in one location generate advantages through specialised labour, supplier depth and knowledge spillover.
- Porter argues that competitive advantage in global industries is frequently determined by conditions in the firm's home location.
- Diversification creates value only when the corporate parent transfers skills or shares activities, not through portfolio management alone.
Who should read it
Executives and investors who want Porter's complete framework in article form, including the strategy pieces that are the most cited in the field.
About Michael E. Porter
Bishop William Lawrence University Professor Emeritus, Harvard Business School; founder, Institute for Strategy and Competitiveness
Competitive Strategy and the five-forces framework are the primary source for industry analysis, and Competitive Advantage supplied the value-chain vocabulary the field still uses.
Where it sits in the reference 2
Similar books 6
Chosen by shared topics, the entries that hold them, and the people who recommended both.
