Competitive Strategy

Knowledge Graph: Competitive Strategy (Michael E. Porter, 1980)

Editorial spotlight: ↑ the structural determinant — profitability flows from industry forces, not firm merit

Concepts

• Porter's Five Forces framework (importance 5): The structural analysis model: industry profitability determined by five competitive forces rather than firm-level factors. Central analytical tool of the book.. Source: (from training memory of book — Chapter 1).
• Porter's structural analysis (importance 5): The method of examining industry structure to predict long-run profitability. Strategy as science, not art.. Source: (from training memory of book — Chapter 1).
• Porter's three generic strategies (importance 5): Overall cost leadership, differentiation, and focus. The exhaustive set of defensible positions. Stuck in the middle is recipe for below-average performance.. Source: (from training memory of book — Chapter 2).
• Porter's value chain (importance 5): Disaggregating firm into strategically relevant activities to understand cost behavior and sources of differentiation. Primary and support activities.. Source: (from training memory of book — Chapter 2).
• Porter's competitive advantage (importance 5): Sustained superior performance arising from either lower cost or differentiation. Must be sustainable against forces and defendable against imitation.. Source: (from training memory of book — Chapter 2).
• Porter's rivalry among existing competitors (importance 4): Force #1: Jockeying for position through price, advertising, product introduction. Intensity depends on concentration, growth rate, cost structure.. Source: (from training memory of book — Chapter 1).
• Porter's threat of new entrants (importance 4): Force #2: Potential competitors limited by entry barriers. New entrants bring new capacity and desire for market share.. Source: (from training memory of book — Chapter 1).
• Porter's threat of substitute products (importance 4): Force #3: Products in other industries that can perform same function. Limit profit potential by placing ceiling on prices.. Source: (from training memory of book — Chapter 1).
• Porter's bargaining power of buyers (importance 4): Force #4: Customers force down prices, demand higher quality or more service. Powerful when concentrated or purchase large volumes.. Source: (from training memory of book — Chapter 1).
• Porter's bargaining power of suppliers (importance 4): Force #5: Suppliers raise prices or reduce quality. Powerful when dominated by few companies and selling unique or differentiated products.. Source: (from training memory of book — Chapter 1).
• Porter's strategic positioning (importance 4): Firm's choice of competitive approach and scope within industry. Sustainable position vis-à-vis five forces. Foundation of competitive advantage.. Source: (from training memory of book — Chapter 2).
• Porter's industry attractiveness (importance 4): Long-run profit potential determined by five forces. Some industries structurally more attractive than others. Choose industries carefully.. Source: (from training memory of book — Chapter 1).
• Porter's sustainability conditions (importance 4): Advantage sustainable when source cannot be imitated. Based on multiple sources, proprietary learning, asset stocks, first-mover advantages.. Source: (from training memory of book — Chapter 2).
• Porter's relative position principle (importance 4): Within industry, profitability varies by how firm is positioned relative to five forces. Better positioned firms earn superior returns.. Source: (from training memory of book — Chapter 1).
• Porter's strategic group (importance 3): Cluster of firms following similar strategies along strategic dimensions. Useful intermediate frame between industry and firm analysis.. Source: (from training memory of book — Chapter 7).
• Porter's mobility barriers (importance 3): Factors protecting strategic groups from entry by other firms. Like entry barriers but apply to movement between groups within industry.. Source: (from training memory of book — Chapter 7).
• Porter's economies of scale barrier (importance 3): Decline in unit costs as absolute volume per period increases. Major entry barrier forcing entrant to come in at large scale or accept cost disadvantage.. Source: (from training memory of book — Chapter 1).
• Porter's product differentiation barrier (importance 3): Incumbent firms have brand identification and customer loyalty. Entrant must spend heavily to overcome. Creates entry barrier.. Source: (from training memory of book — Chapter 1).
• Porter's switching costs (importance 3): One-time costs facing buyer when switching from one supplier to another. Include retraining, new equipment, redesign, psychic costs of severing relationship.. Source: (from training memory of book — Chapter 1).
• Porter's absolute cost advantages (importance 3): Incumbent firms possess cost advantages independent of size: proprietary technology, favorable access to raw materials, favorable locations, learning curve, government subsidies.. Source: (from training memory of book — Chapter 1).
• Porter's buyer price sensitivity (importance 3): Substitute products place upper limit on prices through price-performance tradeoff. Tighter limit when substitutes improving or produced by industries earning high profits.. Source: (from training memory of book — Chapter 1).
• Porter's industry growth rate (importance 3): Slow growth makes rivalry more intense as firms fight for market share. Fast growth allows all to improve results without stealing share.. Source: (from training memory of book — Chapter 1).
• Porter's exit barriers (importance 3): Economic, strategic, emotional factors keeping firms competing despite low or negative returns. Specialized assets, fixed costs, strategic interrelationships, emotional barriers.. Source: (from training memory of book — Chapter 12).
• Porter's fragmented industry (importance 3): No firm has significant market share or strongly influence outcome. Many small and medium-sized firms. Common pattern with specific causes.. Source: (from training memory of book — Chapter 9).
• Porter's emerging industry (importance 3): Newly formed or reformed industry created by technological innovation, changes in cost relationships, new consumer needs. Absence of established rules.. Source: (from training memory of book — Chapter 10).
• Porter's declining industry (importance 3): Industry in terminal decline facing absolute fall in unit sales over sustained period. Requires different strategic logic than mature or growing industries.. Source: (from training memory of book — Chapter 12).
• Porter's global industry (importance 3): Industry where competitive position in one country significantly affected by position in other countries. Requires coordinated worldwide strategy.. Source: (from training memory of book — Chapter 13).
• Porter's vertical integration decision (importance 3): Degree to which firm owns its upstream suppliers and downstream buyers. Strategic benefits and costs depend on industry structure and firm position.. Source: (from training memory of book — Chapter 14).
• Porter's industry evolution (importance 3): Predictable changes in industry structure over time driven by processes: long-run growth, buyer learning, diffusion of knowledge, scale changes, cost changes.. Source: (from training memory of book — Chapter 8).
• Porter's technological change impact (importance 3): Technology affects competitive advantage through impact on cost or differentiation. Not all technical change is strategically beneficial.. Source: (from training memory of book — Chapter 8).
• Porter's competitive dynamics (importance 3): Move and countermove among competitors over time. Pattern of rivalry depends on number of competitors, their similarity, market conditions.. Source: (from training memory of book — Chapter 4).
• Porter's relative power concept (importance 3): Buyer and supplier power measured relative to industry. Same buyer has different power in different industries based on alternatives and switching costs.. Source: (from training memory of book — Chapter 1).
• Porter's value activities (importance 3): Physically and technologically distinct activities firm performs. Building blocks of competitive advantage. Nine generic categories.. Source: (from training memory of book — Chapter 2).
• Porter's cost drivers (importance 3): Structural factors determining cost of value activity: scale, learning, capacity utilization, linkages, interrelationships, integration, timing, policies.. Source: (from training memory of book — Chapter 2).
• Porter's differentiation drivers (importance 3): Sources of uniqueness: policy choices, linkages, timing, location, interrelationships, learning, integration, scale, institutional factors.. Source: (from training memory of book — Chapter 2).
• Porter's competitive scope (importance 3): Breadth of targets: segment, geography, vertical. Broad versus narrow scope fundamental strategic choice. Focus exploits narrow scope.. Source: (from training memory of book — Chapter 2).
• Porter's capital requirements barrier (importance 2): Need to invest large financial resources to compete. Capital necessary for facilities, inventory, customer credit, advertising, R&D.. Source: (from training memory of book — Chapter 1).
• Porter's distribution access barrier (importance 2): New entrant must secure distribution for product. Wholesale or retail channels limited, existing firms have tied them up. Barrier in consumer goods.. Source: (from training memory of book — Chapter 1).
• Porter's government policy barrier (importance 2): Government can limit or foreclose entry through licensing, access to raw materials, pollution standards, product safety regulations. Subtle barriers in regulated industries.. Source: (from training memory of book — Chapter 1).
• Porter's expected retaliation (importance 2): Entrant may expect vigorous retaliation from incumbents: history of retaliation, established firms with resources, slow industry growth making accommodation difficult.. Source: (from training memory of book — Chapter 1).
• Porter's buyer concentration (importance 2): Buyers powerful when concentrated or purchase large volumes relative to seller sales. Large-volume buyers gain leverage in negotiating.. Source: (from training memory of book — Chapter 1).
• Porter's buyer information advantage (importance 2): Buyers with full information about demand, market prices, supplier costs in better position to negotiate. Information revolution shifts power.. Source: (from training memory of book — Chapter 1).
• Porter's supplier concentration (importance 2): Suppliers powerful when dominated by few companies and more concentrated than industry they sell to. Monopolistic suppliers exact maximum price.. Source: (from training memory of book — Chapter 1).
• Porter's unique supplier products (importance 2): Suppliers powerful when product unique or differentiated, or switching costs high. Buyer faces few alternatives and is locked in.. Source: (from training memory of book — Chapter 1).
• Porter's forward integration threat (importance 2): Suppliers credibly threaten to integrate forward into industry. Places ceiling on prices suppliers can charge. Countervailing force.. Source: (from training memory of book — Chapter 1).
• Porter's fixed costs pressure (importance 2): High fixed costs create pressure to fill capacity, leading to price cutting when excess capacity. Industries like paper, aluminum susceptible.. Source: (from training memory of book — Chapter 1).
• Porter's product differences rivalry (importance 2): Lack of differentiation or switching costs means choice based on price and service. Strong incentive to cut price. Commodity products intensify rivalry.. Source: (from training memory of book — Chapter 1).
• Porter's market signals (importance 2): Any action by competitor providing direct or indirect indication of intentions, motives, goals, or internal situation. Announcements, press comments, reactions.. Source: (from training memory of book — Chapter 4).
• Porter's capacity expansion strategy (importance 2): Timing and scale decisions in adding production capacity. Large-scale preemptive moves versus small incremental additions. Industry structure dictates logic.. Source: (from training memory of book — Chapter 15).
• Porter's industry consolidation (importance 2): Trend from fragmentation to concentration as industry matures. Occurs when economic or strategic changes remove causes of fragmentation.. Source: (from training memory of book — Chapter 9).
• Porter's first-mover advantages (importance 2): Benefits to pioneering: reputation, occupy best position, switching costs, cost advantages from learning. But first mover bears uncertainties and costs.. Source: (from training memory of book — Chapter 10).
• Porter's strategic commitment (importance 2): Moves that are visible, irreversible, comprehensible to competitors. Signal intent and bind firm to course of action. Communicate credibility.. Source: (from training memory of book — Chapter 5).
• Porter's organizational fit requirement (importance 2): Generic strategy must be supported by appropriate organizational arrangements, control systems, incentives. Misalignment leads to failure.. Source: (from training memory of book — Chapter 2).
• Porter's learning curve (importance 2): Costs decline with cumulative volume as firm gains experience. Can be barrier to entry if proprietary learning and leaders maintain volume.. Source: (from training memory of book — Chapter 1).
• Porter's multipoint competition (importance 2): Firms compete in multiple markets simultaneously. Actions in one market may provoke responses in others. Changes strategic logic.. Source: (from training memory of book — Chapter 13).
• Porter's strategic uncertainty (importance 2): Inability to predict competitor moves, industry evolution, technological change. Strategy must be robust to range of futures.. Source: (from training memory of book — Chapter 8).
• Porter's overcapacity dynamics (importance 2): Chronic excess capacity depresses prices and profitability. Caused by lumpy additions, exit barriers, competitive dynamics. Common structural problem.. Source: (from training memory of book — Chapter 15).
• Porter's industry boundary definition (importance 2): Where to draw lines around industry for analysis. Too broad obscures differences; too narrow misses interdependencies. No single right answer.. Source: (from training memory of book — Chapter 1).
• Porter's diversification test (importance 2): Three tests for diversification: attractiveness, cost-of-entry, better-off. New business must pass all three or destroy value. Most fail.. Source: (from training memory of book — Chapter 16).
• Porter's industry life cycle critique (importance 2): Life cycle concept of limited value. Pattern not predetermined. Strategic choices and structural change drive evolution, not automatic stages.. Source: (from training memory of book — Chapter 8).
• Porter's cooperative strategies (importance 2): Collective strategies to improve industry structure for all. Trade associations, coalitions, implicit coordination. Can increase total profits.. Source: (from training memory of book — Chapter 4).
• Porter's demand-side conditions (importance 2): Buyer characteristics affecting competitive dynamics: buyer concentration, volume, information, price sensitivity. Shape rivalry and profitability.. Source: (from training memory of book — Chapter 1).
• Porter's supply-side conditions (importance 2): Supplier characteristics affecting competitive dynamics: concentration, differentiation, switching costs, forward integration threat. Shape input costs.. Source: (from training memory of book — Chapter 1).
• Porter's interrelationships (importance 2): Tangible connections between value chains of different businesses. Source of advantage in diversified firms if managed correctly.. Source: (from training memory of book — Chapter 16).
• Porter's competitor response profile (importance 2): Likely moves and reactions of each competitor. Predict from analysis of goals, assumptions, strategy, capabilities. Anticipate countermoves.. Source: (from training memory of book — Chapter 3).
• Porter's strategic group mobility (importance 2): Ease of movement between strategic groups limited by barriers. Height varies by group. Map reveals which positions achievable and defensible.. Source: (from training memory of book — Chapter 7).
• Porter's endgame strategy matrix (importance 2): Decline strategy choice depends on two dimensions: structural attractiveness of declining industry and firm's competitive strengths. Four cells.. Source: (from training memory of book — Chapter 12).
• Porter's global configuration-coordination (importance 2): Two dimensions of global strategy: where to locate activities (configuration) and how to coordinate across locations. Four patterns emerge.. Source: (from training memory of book — Chapter 13).
• Porter's integration benefits-costs (importance 2): Benefits: economies, technology, assured supply/demand. Costs: increased exit barriers, reduced flexibility, different managerial needs. Net depends on context.. Source: (from training memory of book — Chapter 14).
• Porter's buyer fragmentation cause (importance 1): Fragmentation often caused by low entry barriers, diseconomies of scale, diverse buyer needs, high transportation costs, regulatory constraints.. Source: (from training memory of book — Chapter 9).

Claims

• Porter's industry-determines-profitability thesis (importance 5): Core thesis: firm profitability determined primarily by industry structure, not firm-specific factors. Some industries inherently more profitable than others.. Source: (from training memory of book — Chapter 1).
• Porter's stuck in the middle (importance 4): Firm failing to develop strategy in at least one direction is guaranteed low profitability. No competitive advantage. Will compete at disadvantage.. Source: (from training memory of book — Chapter 2).
• Porter's strategic choice matters (importance 4): Given industry structure, firm choices about positioning and activities determine performance. Strategy is not predetermined by structure.. Source: (from training memory of book — Chapter 2).
• Porter's strategic trade-offs (importance 3): Cannot pursue cost leadership and differentiation simultaneously without getting stuck. Attempting both spreads resources, confuses, compromises.. Source: (from training memory of book — Chapter 2).
• Porter's analysis-over-intuition (importance 3): Rigorous structural analysis superior to managerial intuition or experience. Strategy can be taught as analytical discipline.. Source: (from training memory of book — Preface).

Methods

• Porter's cost leadership strategy (importance 4): Achieving lowest cost position in industry through economies of scale, proprietary technology, preferential access to raw materials. Requires aggressive construction of efficient facilities.. Source: (from training memory of book — Chapter 2).
• Porter's differentiation strategy (importance 4): Being unique in industry along dimensions widely valued by buyers. Select attributes different from rivals and position to meet those needs. Premium price.. Source: (from training memory of book — Chapter 2).
• Porter's focus strategy (importance 4): Concentrating on particular buyer group, segment, or geographic market. Built around serving particular target very well. Can be cost focus or differentiation focus.. Source: (from training memory of book — Chapter 2).
• Porter's competitor analysis framework (importance 4): Systematic diagnosis of competitor through four components: future goals, current strategy, assumptions, capabilities. Predicts competitor response profiles.. Source: (from training memory of book — Chapter 3).
• Porter's defensive tactics (importance 2): Actions to deter challengers or deflect attacks: raising structural barriers, increasing expected retaliation, lower inducement to attack.. Source: (from training memory of book — Chapter 5).
• Porter's offensive strategies (importance 2): Ways to attack: go where competitor is weak, take actions competitor will respond slowly to, harness commitment through irreversible moves.. Source: (from training memory of book — Chapter 5).
• Porter's buyer selection (importance 2): Choosing buyers where firm has competitive advantage in serving or where buyer power is low. Not all revenue is equally profitable.. Source: (from training memory of book — Chapter 6).
• Porter's decline strategy choices (importance 2): Four options in decline: leadership, niche, harvest, divest quickly. Choice depends on industry structure in decline and firm strengths.. Source: (from training memory of book — Chapter 12).
• Porter's global strategy configuration (importance 2): Pattern of worldwide competition: multidomestic versus global. Different industries have different patterns. Coordination requirements differ.. Source: (from training memory of book — Chapter 13).
• Porter's industry scenarios (importance 2): Internally consistent view of future industry structure. Build scenarios from uncertainties about industry evolution to test strategy robustness.. Source: (from training memory of book — Chapter 8).
• Porter's harvest strategy (importance 2): Controlled disinvestment to maximize cash flow over limited horizon. Cut investment, ride down sales, extract value. For declining or mature positions.. Source: (from training memory of book — Chapter 12).
• Porter's coalition strategy (importance 2): Forming coalitions with suppliers, buyers, competitors to improve competitive position. Joint ventures, licensing, long-term contracts.. Source: (from training memory of book — Chapter 13).
• Porter's environmental analysis rejection (importance 2): Industry structure analysis superior to broad environmental scanning. Focus on five forces, not PEST factors. Structure determines profitability.. Source: (from training memory of book — Chapter 1).
• Porter's strategic planning critique (importance 2): Formal planning often fails by mechanistic extrapolation. Need structural analysis grounded in economics. Process should foster strategic thinking.. Source: (from training memory of book — Preface).
• Porter's preemptive moves (importance 2): Actions foreclosing options for competitors: capacity expansion, vertical integration, spatial preemption, buyer contracts. Must be irreversible.. Source: (from training memory of book — Chapter 15).

Relations

• Porter's structural analysis requires Porter's Five Forces framework
• Porter's Five Forces framework generalizes Porter's rivalry among existing competitors
• Porter's Five Forces framework generalizes Porter's threat of new entrants
• Porter's Five Forces framework generalizes Porter's threat of substitute products
• Porter's Five Forces framework generalizes Porter's bargaining power of buyers
• Porter's Five Forces framework generalizes Porter's bargaining power of suppliers
• Porter's industry-determines-profitability thesis evidences Porter's Five Forces framework
• Porter's Five Forces framework enables Porter's industry attractiveness
• Porter's structural analysis enables Porter's competitive advantage
• Porter's competitive advantage requires Porter's three generic strategies
• Porter's three generic strategies generalizes Porter's cost leadership strategy
• Porter's three generic strategies generalizes Porter's differentiation strategy
• Porter's three generic strategies generalizes Porter's focus strategy
• Porter's stuck in the middle contradicts Porter's three generic strategies
• Porter's strategic trade-offs supports Porter's stuck in the middle
• Porter's value chain enables Porter's cost leadership strategy
• Porter's value chain enables Porter's differentiation strategy
• Porter's value activities generalizes Porter's value chain
• Porter's cost drivers enables Porter's cost leadership strategy
• Porter's differentiation drivers enables Porter's differentiation strategy
• Porter's sustainability conditions requires Porter's competitive advantage
• Porter's threat of new entrants generalizes Porter's economies of scale barrier
• Porter's threat of new entrants generalizes Porter's product differentiation barrier
• Porter's threat of new entrants generalizes Porter's capital requirements barrier
• Porter's threat of new entrants generalizes Porter's switching costs
• Porter's threat of new entrants generalizes Porter's distribution access barrier
• Porter's threat of new entrants generalizes Porter's absolute cost advantages
• Porter's threat of new entrants generalizes Porter's government policy barrier
• Porter's threat of new entrants generalizes Porter's expected retaliation
• Porter's learning curve exemplifies Porter's absolute cost advantages
• Porter's threat of substitute products enables Porter's buyer price sensitivity
• Porter's bargaining power of buyers generalizes Porter's buyer concentration
• Porter's bargaining power of buyers generalizes Porter's buyer information advantage
• Porter's bargaining power of suppliers generalizes Porter's supplier concentration
• Porter's bargaining power of suppliers generalizes Porter's unique supplier products
• Porter's bargaining power of suppliers generalizes Porter's forward integration threat
• Porter's rivalry among existing competitors generalizes Porter's industry growth rate
• Porter's rivalry among existing competitors generalizes Porter's fixed costs pressure
• Porter's rivalry among existing competitors generalizes Porter's product differences rivalry
• Porter's rivalry among existing competitors generalizes Porter's exit barriers
• Porter's strategic group requires Porter's mobility barriers
• Porter's mobility barriers enables Porter's strategic group mobility
• Porter's fragmented industry generalizes Porter's buyer fragmentation cause
• Porter's emerging industry enables Porter's first-mover advantages
• Porter's declining industry requires Porter's decline strategy choices
• Porter's decline strategy choices generalizes Porter's harvest strategy
• Porter's decline strategy choices generalizes Porter's endgame strategy matrix
• Porter's global industry requires Porter's global strategy configuration
• Porter's global strategy configuration generalizes Porter's global configuration-coordination
• Porter's competitor analysis framework requires Porter's market signals
• Porter's competitor analysis framework enables Porter's competitor response profile
• Porter's offensive strategies enables Porter's competitive dynamics
• Porter's defensive tactics enables Porter's competitive dynamics
• Porter's strategic commitment enables Porter's offensive strategies
• Porter's vertical integration decision requires Porter's integration benefits-costs
• Porter's capacity expansion strategy exemplifies Porter's preemptive moves
• Porter's capacity expansion strategy enables Porter's overcapacity dynamics
• Porter's industry evolution generalizes Porter's technological change impact
• Porter's industry evolution generalizes Porter's industry consolidation
• Porter's industry scenarios requires Porter's strategic uncertainty
• Porter's organizational fit requirement requires Porter's three generic strategies
• Porter's multipoint competition exemplifies Porter's global industry
• Porter's coalition strategy exemplifies Porter's cooperative strategies
• Porter's strategic positioning requires Porter's Five Forces framework
• Porter's strategic positioning requires Porter's three generic strategies
• Porter's relative position principle enables Porter's strategic positioning
• Porter's diversification test requires Porter's interrelationships
• Porter's competitive scope enables Porter's focus strategy
• Porter's buyer selection requires Porter's bargaining power of buyers
• Porter's industry life cycle critique contradicts Porter's industry evolution
• Porter's demand-side conditions generalizes Porter's bargaining power of buyers
• Porter's supply-side conditions generalizes Porter's bargaining power of suppliers
• Porter's environmental analysis rejection contradicts Porter's structural analysis
• Porter's strategic planning critique requires Porter's structural analysis
• Porter's analysis-over-intuition supports Porter's structural analysis
• Porter's strategic choice matters supports Porter's three generic strategies
• Porter's industry boundary definition requires Porter's Five Forces framework
• Porter's relative power concept generalizes Porter's bargaining power of buyers
• Porter's relative power concept generalizes Porter's bargaining power of suppliers
• Porter's industry attractiveness evidences Porter's industry-determines-profitability thesis
• Porter's competitive advantage requires Porter's relative position principle
• Porter's cost leadership strategy requires Porter's economies of scale barrier
• Porter's cost leadership strategy requires Porter's learning curve
• Porter's differentiation strategy enables Porter's product differentiation barrier
• Porter's differentiation strategy enables Porter's switching costs
• Porter's exit barriers enables Porter's declining industry
• Porter's fixed costs pressure enables Porter's overcapacity dynamics
• Porter's strategic positioning enables Porter's sustainability conditions
• Porter's three generic strategies requires Porter's strategic trade-offs
• Porter's Five Forces framework enables Porter's industry-determines-profitability thesis

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