SMM 1.2.

• "Be Number 1 or Get Out" Model: Suggests that companies achieve success by dominating their industries.
• Nature of Strategic Competition: Contrasts with warfare and sports; success doesn't require rivals to fail. Companies can invent their own "game," c to the performing arts analogy. Highlights positive-sum competition, emphasizing value creation.
• Critique of "Best" Mentality: Companies often proclaim themselves as the "best" in products, service, and talent. Porter criticizes the competition-to-be-the-best mindset as flawed. Popular metaphors from warfare and sports contribute to this mindset.
• Business vs. Sports Analogy: In business, multiple winners can coexist, meeting diverse customer needs. Walmart and Target both thrive in discount retailing, offering different merchandise mixes. Business competition is multidimensional, not a single contest with one set of rules.
• Creating Unique Events: Companies can choose to create their own events rather than entering specific races. Businesses can focus on meeting various customer needs, leading to multiple ways to win. Porter argues that in most businesses, there is no universal "best.“
• Competitive Convergence and Zero-Sum Competition: Pursuing the "one best way" leads to destructive, zero-sum competition. Competitive convergence occurs as offerings and practices become similar. Customers are left with only price as a basis for choice, leading to mutual destruction.
• Impact on Industry and Stakeholders: Collateral damage occurs as rivals are squeezed for resources and cut costs. In extreme cases, industry profitability may require limiting competition through consolidation.
• Strategic competition means choosing a path different from that of others.
• Porter on Competing to “be Unique”: Companies should focus on creating unique value, not just being the best.
• Competition is a singular noun. Porter believes that in practice, competition takes almost as many forms as there are industries. • At one extreme is competition “to be the best.” • At the other extreme is competition “to be unique.”
• Porter’s five forces determine the industry’s structure, an important concept.
• The particular configuration of Porter’s five forces tells you immediately how the industry “works,” how it creates and shares value. It explains the industry’s profitability
• Powerful suppliers will charge higher prices or insist on more favorable terms, lowering industry profitability.
• Powerful buyers can leverage their influence to lower prices. They may demand increased value in the product or service. Results in lower industry profitability as customers capture more value.
• Substitutes—products or services that meet the same basic need as the industry’s product in a different way • Assessing economic substitutes involves determining if they offer a competitive price-performance trade-off compared to the industry's product. • Switching costs play a significant role in substitution.
• The threat of entry dampens profitability in two major ways: • It caps prices, because higher industry prices would only make entry more attractive for newcomers. • Incumbents typically have to spend more to satisfy their customers to create entry barriers for newcomers.
• The intensity of rivalry likely to be greatest if : • The industry is composed of many competitors or if competitors are roughly equal in size and power. • Slow growth provokes battles over market share. • High exit barriers prevent companies from leaving the industry. • Rivals are irrationally committed to the business; that is, financial performance is not the overriding goal
• Price competition is the most damaging form of rivalry.
• The collective strength of the five forces matters because affects prices, costs, and the investment required to compete.
• Industry structure is dynamic, not static, and requires continuous analysis.
• When conducting industry analysis, it involves capturing a moment in time while also evaluating trends in the five forces.
• Primary competition is for earning profits rather than just taking business from rivals.
• Business competition involves a struggle for capturing the value an industry creates
• Companies compete not only with direct rivals but also with customers, suppliers, potential entrants, and substitutes.
• The collective strength of the five forces influences industry profitability by impacting prices, costs, and required investment.
• A good strategy aims to outperform the industry average baseline in terms of Profit and Loss (P&L).
• Simply declaring industry attractiveness or unattractiveness with five forces analysis overlooks its full potential.
• Industry structure is dynamic, not static.
• Five forces analysis helps anticipate and exploit structural changes in the industry
• Industry structure "explains" the financials of every company in the industry
• Insights from industry structure should guide decisions on where and how to compete.