Summary of the Book "Creating & Sustaining Superior Performance" by Michael Porter

by Toby Welch
Having the competitive advantage helps businesses flourish.

Having the competitive advantage helps businesses flourish.

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"Competitive Advantage: Creating and Sustaining Superior Performance" by Michael E. Porter hit bookshelves on June 1, 1998. Since then, it has sold millions of copies. "Competitive Advantage" is a follow-up to Porter's bestsellers "Competitive Strategy: Techniques for Analyzing Industries and Competitors" (1980) and "The Competitive Advantage of Nations" (1990). At 555 pages, "Competitive Advantage" is a lengthy tome, but it has helped millions of people better understand the concept of competition in the business realm.

Competitive Advantage

When Porter talks about competitive advantage, he refers to the strategic advantage that a business has over rival businesses in the same industry. Having competitive advantage allows a business to maintain a stronger position in the business environment. It occurs when a company or organization develops characteristics that allow it to perform better than its competitors. Michael Porter proposed the theory in 1985 and it has been a mainstream term since then.

Overview

When it came out, "Competitive Advantage" showed people a new way of comprehending how business firms work. Porter's competitive advantage theory is based on the importance of the "activities" that a company involves itself in and the idea that the "activities" are what gives the company an advantage over organizations it is competing against. "Competitive Advantage" is now considered a bible when dealing with local and international businesses. It guides organizations in their quest to figure out the drivers of cost and a company's relative cost position. Although some parts of the book are slightly outdated, the material and theories will be relevant for years to come.

Value Chain

In "Competitive Advantage," Porter introduces readers to the concept of the value chain. The idea behind the value chain is to provide customers with a level of value that exceeds the cost of the "activities," resulting in a profit to the organization. Businesses isolate the realities of buyer value and figure out why one product or service is chosen over another. "Competitive Advantage" was the first mainstream manual to offer the tools required to dissect an industry and explore the diverse aspect of competition. When this book came out, the concept of the value chain was groundbreaking and it is in wide use to this day.

Contents

As "Competitive Advantage" builds on "Competitive Strategy," a summary of "Competitive Strategy" is Chapter 1. The remainder of the book is divided into four parts. Principles of Competitive Advantage introduces the concept of the value chain in reference to cost advantage, differentiation, technology and competitors. Competitive Scope Within an Industry discusses industry segmentation and substitution. Corporate Strategy and Competitive Advantage delves into the correlation between business units, strategy, products and interrelationships. Implications for Offensive and Defensive Competitive Strategy touches on scenarios regarding uncertainty, strategy and attacks on industry leaders.

References

  • "Competitive Advantage: Creating and Sustaining Superior Performance"; Michael E. Porter; 1998

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