Understanding Michael Porter: The Essential Guide to Competition and Strategy

Price competition, Porter warns, is the most damaging form of rivalry. The more rivalry is based on price, the more you are engaged in competing to be the best.

Choices in the value proposition that limit what a company will do are essential to strategy because they create the opportunity to tailor activities in a way that best delivers that kind of value.

a business like specialty coffee retailing, for example, where entry barriers are low, Starbucks must constantly invest to refresh its stores and its menus. If it slacks off, it effectively opens the door for a new rival to join the fray.

While not every single activity need be unique, robust strategies always involve a significant degree of tailoring. To establish a competitive advantage, a company must deliver its distinctive value through a distinctive value chain. It must perform different activities than rivals or perform similar activities in different ways. Thus the value pro

Trade-offs play such a critical role that it’s no exaggeration to call them strategy’s linchpin. They hold a strategy together as they contribute to both creating and sustaining competitive advantage.

A common mistake in strategy is to choose the same core competences as everyone else in your industry.

The first test of a strategy is whether your value proposition is different from your rivals. If you are trying to serve the same customers and meet the same needs and sell at the same relative price, then by Porter’s definition, you don’t have a strategy. You’re competing to be the best.

Porter’s prescription: aim to be unique, not best. Creating value, not beating rivals, is at the heart of competition.

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