Competitive Advantage (Porter)

The sequel to Competitive Strategy, and the book that moved Porter’s analysis from the industry down into the firm: competitive advantage comes from a chain of discrete activities, each of which can be a source of cost advantage or differentiation, and a strategy is a set of choices about which activities to perform and how to link them. The value chain, the generic strategies, and the insistence that advantage has to be traced to something specific a company does differently all come from here.

Why it’s on the list: Li Lu’s investing section is an owner’s reading list, and this is the entry that supplies the vocabulary for the question an owner actually has to answer — why this business earns more than its competitors, and whether that can hold.

Where I saw it: Li Lu’s Recommended Book List, entry 41 of section IV, cited as Free Press, 1998. This is the section the saved X posts photographed. Full transcription: Li Lu’s Recommended Book List.

Connections

• Li Lu’s Recommended Book List — the list this came from.
• Li Lu — the Himalaya Capital founder who assembled it.
• Michael Porter — the author.
• Competitive Advantage — the concept page this book named.
• Moats — the investor’s version of the same question: what makes the advantage durable.
• Strategy — the discipline the value chain was written for.