Understanding Michael Porter: The Essential Guide to Competition and Strategy

Good strategies depend on the connection among many things, on making interdependent choices.

Fit has to do with how the activities in the value chain relate to one another. Its role in strategy highlights yet another popular misconception, that competitive success can be explained by one core competence, the one thing you do really well. The fallacy here is that good strategies don’t rely on just one thing, on making one choice. Nor do the

Once companies achieve parity in execution, however, they face real trade-offs. Then, adding “quality” usually

means adding new features, using better materials, or offering greater service. In a passenger car, for example, it might mean upgrading from cloth seats to leather, or adding a global positioning system. Quality in that sense of the word is definitely not free. It almost always costs more to add significant product features, improve service, provi

Why Do Trade-offs Arise?

Tailored choices pervade IKEA’s value chain. And many of those choices about how to create its distinctive form of value are not just different from the choices its rivals make. They are incompatible—that is, a rival couldn’t copy what IKEA does without compromising or damaging the value it creates for its customers. These are genuine either-or cho

Now think about the cumulative impact of these differences in cost and value, all of them stemming from one trade-off: either you sell fully

An intriguing recent study has found a so-called IKEA effect: that self-assembly actually raises, not lowers, the price consumers would be willing to pay. Not bad when you can raise customer value and lower your own costs at the same time!

In-store service. Traditional retailers use sales associates to help customers with the hundreds of choices involved in furnishing a home. Sales associates, however, add cost. Here is another sharp trade-off, an either-or choice. Either you staff a store with sales associates or you don’t, but you can’t have it both ways. IKEA is explicit about thi