On Competition

On Competition by Michael E. Porter

Highlights by David Willden

Five Competitive Forces That Shape Strategy

There are five underlying factors that affect an industry and firm’s profitability::

    • Threat of new entrants
    • Bargaining power of suppliers
    • Bargaining power of buyers
    • Threat of substitute products or services
    • Rivalry among existing competitors

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Power of Information

Providing the right information at the right time to the right people can provide a firm a significant competitive advantage in:

  • Lowering costs
  • Supporting differentiation strategies
  • Extending scope or reach of the firm
  • Fostering new businesses

The Competitiveness of Locations

Locale should play a key role in corporate strategy. Global companies are headquartered and often perform much of their work from headquarters. To compete globally, firms must:

  • Find a unique competitive position
  • Develop and maintain a long-term perspective. Developing and educating new market can take time
  • Don’t market the same way in all countries
  • Innovate and perform core activities in your headquarters
  • Perform non-core activities in other areas to extend your influence

Competitive Solutions to Society Problems


  • A clean environment doesn’t need to increase costs and reduce competitiveness
  • Contamination generally points to sloppy design and poor production processes
  • Improving productivity can reduce pollution, help you to become more efficient, and to better compete
  • Regulations are necessary to motivate innovation

Health Care

  • The threat of malpractice lawsuits unnecessarily increase medical costs

On Competition