Competition Demystified: A Radically Simplified Approach to Business Strategy

Strategies are indeed plans for achieving and sustaining success. But they are not just any ideas for how to make a product or service and sell it profitably to customers. Rather, strategies are those plans that specifically focus on the actions and responses of competitors.

The second strategic issue involves the management of those external agents. In order to devise and implement effective strategy, a firm has to anticipate and, if possible, control the responses of these external agents.

the average absolute share change exceeds 5 percentage points, there are no barriers to entry; if the share change is 2 percentage points or less, the barriers are formidable.

Constant pursuit of operational efficiency is essential for companies in markets without competitive advantages.

Most companies that manage to grow and still achieve a high level of profitability do it in one of three ways. They replicate their local advantages in multiple markets, like Coca-Cola. They continue to focus within their product space as that space itself becomes larger, like Intel. Or, like Wal-Mart and Microsoft, they gradually expand their acti

It is so dominant that leaders seeking to develop and pursue winning strategies should begin by ignoring the others and focus only on it. That force is barriers to entry—the force that underlies Porter’s “Potential Entrants.”

With a universe of companies seeking profitable opportunities for investment, the returns in an unprotected industry will be driven down to levels where there is no “economic profit,” that is, no returns above the costs of the invested capital. If demand conditions enable any single firm to earn unusually high returns, other companies will notice t

Either the existing firms within the market are protected by barriers to entry (or to expansion), or they are not. No other feature of the competitive landscape has as much influence on a company’s success as where it stands in regard to these barriers.

As a first rule of thumb, if you can’t count the top firms in an industry on the fingers of one hand, the chances are good that there are no barriers to entry. The rapid change in market share in table 4.2 confirms the rule. As a second rule of thumb, if over a five-to eight-year period,