Understanding Michael Porter: The Essential Guide to Competition and Strategy

A counterexample that includes all three of these conditions is the price insensitivity of makers of major motion pictures when they buy or rent production equipment. A movie camera, for example, is a highly differentiated piece of equipment. Its price is small relative to the other costs of production, but the performance of the equipment has a bi

Porter identified a set of generic strategies—focus, differentiation, and cost leadership—that

Industry structure can be linked directly to the income statements and balance sheets of every company in the industry. The insights gained from this kind of analysis should lead directly to decisions about where and how to compete.

These five forces—the intensity of rivalry among existing competitors, the bargaining power of buyers (the industry’s customers), the bargaining power of suppliers, the threat of substitutes, and the threat of new entrants—determine the industry’s structure,

Here, because customers have real choices, price is only one competitive variable. Some competitors, such as Vanguard or IKEA, will have strategies emphasizing low price. Others, such as BMW, Apple, or Four Seasons, will command a premium price by offering different features or service levels. Customers will pay more (or less) depending on how they

definition, any successful company has positioned itself favorably in relation to the forces that matter most in its industry.

if you do, you will quickly realize that these terms are loaded. What is competition? How does it work? How do organizations “win”? What, exactly, does superior performance mean?

Instead of belonging to a clear demographic category, the company’s customers will be defined by the common need or set of needs they share at a given time.

Third, expand geographically in a focused way. If you’ve penetrated your strategic opportunity at home, there’s always the rest of the world.