A comprehensive way to understand your competition
Every firm competing in an industry has a competitive strategy, whether explicit or implicit, according to Michael Porter in his book Competitive Strategy: Techniques for Analyzing Industries and Competitors. The book aims to present a comprehensive framework of analytical techniques to help a firm analyse its industry as a whole and predict the industry’s future evolution, to understand its competitors and its own position, and to translate this analysis into a strategy for a particular business.
Chapter 1 describes the five forces driving industry competition: potential entrants, buyers, suppliers, substitutes and industry competitors. Chapter 2 describes the three generic strategies: overall cost leadership, differentiation and focus. Subsequent chapters in Part I of the book explain how to use these forces and strategies in competitor analysis within industries. Part II of the book describes generic industry environments including different growth stages, and Part III describes strategic decisions.
More than thirty years have now passed since the book was written, and many of the companies mentioned have either gone out of business or undergone significant transformations. However, it seems remarkable, given the pace of change of the business environment over the past thirty years, that the frameworks and analytical techniques proposed by the author remain fresh and fully applicable to industries and businesses today.
Although the book is intended for the business practitioner rather than an academic audience, it reads more like a text book and most readers will take some time to work their way through it. However, this remains the most influential and highly regarded book on business strategy, and it is therefore essential reading for strategy practitioners.