Competition Demystified: A Radically Simplified Approach to Business Strategy

by Bruce C. Greenwald, Judd Kahn

Since 1980, Michael Porter’s classic Competitive Strategy has provided the methodology that most big companies use for strategic analysis. But now, distinguished Columbia Business School professor Bruce Greenwald offers a bold new theory of competition—a theory that is far simpler than Porter’s and much easier for strategic planners to apply in the real world.

Porter identified a complex five-force model for studying competition in any market. But Greenwald argues that there is only one essential factor in determining competitive advantages: how easy it is for competitors to enter or expand in a given market. If a company can erect strong barriers to entry—through customer captivity, lower production costs, or economies of scale—it can manage these advantages, anticipate competitors’ moves, or achieve stability through bargaining and cooperation.

Greenwald draws on game theory to explain what you should do if barriers to entry are strong, weak, or nonexistent. He covers a wide range of examples, from retail to telecommunications to auction houses. And his lessons can be applied whether your business is dominated by a single huge player, a handful of roughly equal players, or no one at all.

Competition Demystified will give executives and strategic planners an indispensable new way to exploit competitive advantage and achieve exceptional profits. It is destined to become a management classic.

Genres: Business, Finance, Economics, Nonfiction, Management, Buisness, Entrepreneurship

416 pages, Hardcover

First published January 1, 2005

Reviews

[Viktor Nilsson · Rating 5 out of 5]

My perspective on business has never been management, but rather investment. Still, this book had been recommended by several respected investors, so I decided to give it a try. I was not disappointed!

The title aptly describes what this book is about: formulating a business strategy, based on the presence or absence of competitive advantages (barriers of entry into an industry - "moat" in the words of Warren Buffett). Greenwald has build a framework from Michael Porter's famous theories, but put into an updated and more simplified form. This includes issues such as:
-Evaluating and managing a business's competitive advantages
-How companies can interact to maintain those advantages for their mutual benefit
-What companies can do to minimize harmful competition in their industry

The book starts by clearly examining what is meant by strategy. One thing that struck me from the beginning is that the book is written in a very straightforward way - no mumbo jumbo, no buzzwords, no pretentiousness. Each chapter is divided into one part theory followed by one relevant case study. Each case study covers 10-20 pages, enough to drive home the points, but not so much as to make you get lost or forget. This structure makes understanding much easier, and it helps you remember and will also train your ability to apply the concepts in practice. You can easily read one chapter at a time and then put the book away for a while, if you have to, without losing track. Greenwald finishes with suggestions on new valuation approaches (for whole businesses or capital investments) that can also encompass a company's strategic position.

The book is very well written and easy to grasp. Despite no background in business, I was able to follow everything. Each theoretical concept, no matter how short, is accompanied by loads of examples. Each study is provided with ample explanations of background and industry structure, so you will be able to follow, no matter when or where you grew up.

Well worth reading for investors, as well as managers.

[sherry · Rating 4 out of 5]

The real world case studies of different types of barriers to entry (or lack thereof) is where Competition Demystified shines, but the moment Greenwald pulls back for theoretical explanations, my interest would wane. Maybe it’s because I’m more of an ‘S’ than an ‘N,’ but some parts of this book were so excruciatingly dry, it literally put me to sleep. For this reason, my initial reaction was to give this book 3-stars, but shockingly, I’ve already put the frameworks discussed to work multiple times after reading so bumped up to a 4-star rating.

Although I did think many of the insights were not hugely surprising for those familiar with formulating business and expansion strategies, I appreciated how clearly and cleanly Greenwald bucketed the factors that give rise to strong barriers to entry in a market, as well as how to determine if an existing industry enjoys the benefits of barriers to entry.

Some unstructured, likely obvious, but nevertheless key, applicable takeaways for me (so far):
- First mover does not always mean advantage
- Localization can trump globalization when it comes it economies of scale
- Operational efficiency can be the key to survival (not exactly what Greenwald meant, but I found it interesting to consider for those of us in tech who have had to ‘trim the fat’ during the pandemic after a long period of enjoying cheap, accessible venture capital)
- Differentiation and brand isn’t nearly as valuable as people tend to believe
- Customer loyalty / habits are hard to build but harder to erode (e.g. soda drinkers)
- Synergy, as I’ve suspected all these years, is just a big fancy word business people use to show off their big fancy brain; acquisition should only be considered if it is the cheapest, cost-saving option

Despite being a pretty half-hearted business thinker and someone who hate-reads business books, I have found myself considering revisiting parts of this book to glean additional insights.

[Sy. C · Rating 2 out of 5]

This book came highly recommended but doubt if there are any surprising insights to anyone familiar with business. In fact, I'm seriously dubious if the authors had adequately considered factors like hindsight bias in choosing their examples. Their obvious lack of in-depth knowledge in industries used as examples (such as a very superficial treatment of the competitive advantages of Intel vs Apple) is a turn-off to anyone who has spent time actually understanding these companies. I would highly recommend authors who have ACTUALLY put in years of effort researching their books, such as the rightfully acclaimed Jim Collins (although also subject to the same hindsight biases but far more thorough and thoughtful), Michael Porter, Clayton Christensen (on tech), instead of this work, which seems based on very shallow analysis and is full of sweeping generalizations.

[Zhou Fang · Rating 4 out of 5]

Competition Demystified is an insightful approach at simplifying Michael Porter's approaches in Competitive Strategy, and one of the best business strategy books I've read. Bruce Greenwald's central contention is that barriers to entry is by far the most significant competitive force, and focuses his analysis around it as the defining characteristic of competitive advantage. This is because barriers to entry are what allow a firm to sustain high levels of profitability in excess of cost of capital. Otherwise, firms would enter the industry and compete those excess profits away. There are 3 types of competitive advantages which give rise to barriers to entry:

1. Supply - generally weak advantages characterized by competitive costs such as input, labor, capital, proprietary tech, etc. These advantages tend to erode over time as competition and know-how in the industry increases.

2. Demand - there are 3 types of demand advantages that can be created
a) Habit - recurring purchases of the same product, such as Crest toothpaste or Coke
b) Switching costs - both actual and frictional costs of switching from one product to another. This is most apparent today in software businesses
c) Search costs - expensive/hard to find a replacement. May require significant time, or outside consulting, with low clarity on the usefulness of information on the marketplace

3. Economies of scale - the ability to use higher market share (not just size) to spread fixed costs required to serve a particular market across many units. Economies of scale have to be defended as narrowing in market share allows competitors to catch up and fixed costs as % of total costs declines.

a) A key insight Greenwald provides is that counterintuitively, economies of scale are LOCAL either in geography (that fixed costs can serve) or product line (that advertising can support). The goal is to keep fixed costs required to serve a particular market high, and thus raise the bar for share win required to make entry to the market economically rational. Wal-Mart successfully created dominance in small towns and extended that dominance regionally based on this strategy. Coors' ambitions to be a national beer caused its dominance in its local markets to wane over time, and coincided with both share decline in its dominant markets and profitability decline.

b) Equally counterintuitively, based on Greenwald's logic, fast market growth is a LIABILITY in terms of competitive advantage, since it lowers the share hurdle required for competitors to make the fixed cost investments. Compaq's early dominance in the PC market based on quality eroded as the market grew significantly and price to value propositions improved for its competitors.

The optimal strategy, then, is to create economies of scale combined with customer captivity.

Along the way, Greenwald also makes some very insightful points in other areas:
1. Differentiation is irrelevant - People often focus on brand-driven and premium products without realizing that 1) differentiation isn't free (R&D and marketing have to be constantly invested) and as a result 2) such products do not earn above commodity-like returns on capital. For example, although Mercedes-Benz clearly produced a premium branded product, the company never earned above-average profits compared to the auto industry.
2. Competitive advantage can be identified in an industry if a) market share is stable across a few firms (they don't vary significantly year-to-year) and b) dominant firms actually earn high returns on invested capital
3. Because competitive advantages tend to be local in nature, excessively aspirational strategies such as end-to-end control of a product get dragged down by the weakest links in the supply chain. This was the problem Apple faced in the PC market. Competitive advantages in one area do not translate well to other fields (large demand for HP printers do not translate to large demand for HP computers as a significant appeal of HP printers was their compatibility for multiple machines)
4. Advantages of being a first-mover in an industry have to be weighed against the risk of being locked into first-generation capital equipment. Later entrants may have a lower cost of capital as the equipment improves which leads to lower production costs
5. Competitive conditions in markets can be modeled on game theory. The overarching goal is to try to shift away from prisoners' dilemma type games into cooperative games. There are several approaches by which this can be done, all of which have to be weighed against antitrust laws:
a) Focus on non-overlapping products/geographies
b) Customer-loyalty programs - these have to be based on volume (more rewards as customers spend more) to create stickiness over time
c) Limit output capacity - TV ad-times were agreed to be 8 minutes
d) MFN pricing/price match to limit benefits of price wars (Best Buy price matching, etc.)
e) Limit purchasing/pricing decisions to narrow the window of competition (TV ads were sold in a fixed month timeframe)

The example employed was an in-depth case study on Coke vs. Pepsi's price wars in the '70s. This extended price war finally ended when Coke spun off its bottling business into a separate enterprise with significant debt which signaled a detente.
6. Capacity additions are not reversible which creates asymmetric dynamics. Thus to prevent significant retaliation, must generally approach incumbents with strategy that do not obviate the need to retaliate. For example, encroaching on small territories of multiple incumbents because anyone that responds risks significant collateral damage to their overall business as well as competitive retaliation by other larger incumbents. Kodak's entry into Polaroid's market was a mistake in this vein because Polaroid was dominant in its instant-photography market so the stakes were extremely high.
7. Acquisitions are generally value destructive; they provide no synergies and are often eventually divested. For an acquisition to really produce value, it must produce cost synergies that outweigh both 1) the cost of distraction of getting those synergies applied at the parent level which would not otherwise be present had the acquisition not occurred 2) the premium paid to control the company.
8. Brand value is different than economic value of the brand. Brand value is the premium a consumer is willing to pay for a product (luxury products for example). Economic value of a brand is the return the brand provides (Coke has low brand value but extremely high economic value).
9. Management attention makes a big difference in operational efficiency

Overall I think this book is very insightful and definitely worth the read by any student of business. Its litany of examples, sometimes in-depth, are vivid illustrations of the theoretical framework of the book. I do think it suffers a bit from an overly academic approach--everything is thought of in terms of what is expected once economic equilibria are achieved, and there is lengthy focus on explaining and illustrating game theory approaches which have limited practical use aside from the bigger concepts. Nonetheless, the book is worth the read.

[Cedric Chin · Rating 2 out of 5]

Worthwhile only for the historical contribution to the literature around competitive strategy.

The book’s primary contribution is the observation that it is barriers to entry that is important for competitive strategy. Greenwald believes this formulation is better than Porter’s original conception of the Five Forces, because a focus on one force is far simpler (while still retaining a large amount of explanatory power).

The problem, of course, is that Greenwald’s way of looking at things isn’t exactly right either, as there are ‘barriers’ to competition that don’t prevent against entry (one thinks of the pricing power that is attributable to companies with good brands, that don’t really serve as a barrier to entry but provides a source of differentiated margins anyway).

I think one belief that leads the book astray is the idea that market share *and* sustained high ROIC are signs of the existence of competitive advantage. I believe this formulation is no longer the commonly held one. Michael Mauboussin’s paper Measuring The Moat and Hamilton Helmer’s 7 Powers prefer to use long term sustained ROIC as a measure of moat, which I think is the right way of thinking about this, since there are relatively few competitive advantages that prevent new entrants from taking market share from the incumbents. It is the ability to maintain sustained margins over the long term that truly matter, even if you are in an industry where it is difficult to keep new entrants out.

The rest of the book, in particular the framing of competitive strategy in terms of game theory and entry/preemption games is far too simplistic, and smell of theory-making in lieu of actual practical application.

My recommendation is to skip this entirely and to go with Hamilton Helmer’s 7 Powers. That book supplants this one in pretty much every way, both in theory (it is more complete) and in practice (Reed Hastings swears by it and forces all high ranking managers at Netflix to study it; Helmer has used it for his investing strategy for the past two decades).

[Firebox Research & Strategy · Rating 4 out of 5]

I felt this book was more helpful in understanding the pursuit of business strategy than books like The Art of War. Perhaps I just had terrific strategy professors in grad school, but TAoW seemed too plain and bland to me, almost like I was reading something I had read or learned before. Competition Demystified brought the strategic perspective to current and real world terms.

A good read for college business students.


- Adam -

[Jobin Thomas · Rating 5 out of 5]

I highly recommend this book. But, skip the chapters starting with "co-operation".

My book review/ summary on LinkedIn:
https://www.linkedin.com/pulse/book-s...

[Allen · Rating 4 out of 5]

First 4 - 6 chapters are incredibly valuable. Gets pretty boring after that. A semi-dry read/

[Steven Birch · Rating 3 out of 5]

I stopped reading this book on about pg. 70, and just skimmed some of the remaining chapters. The book reads a little like Harvard Business Review, there are numerous case-studies that show various aspects of Porter's 5 forces. the book focuses on Barriers to Entry as the most important, which makes sense. My issue with the book is that it was written in 2006, and the first case study walks through how Apple is not a great competitor in various technologies, and is probably a bad investment. Unfortunately for the authors, Apple ended up being one of capitalism's best turn around story. tough break.
Could probably be a shorter book too.

[Lucy Calandranis · Rating 3 out of 5]

The most interesting aspects were the map-frameworks of industries and I thought the case studies were very applicable in demonstrating company successes/failures. Got a bit theoretical at times which was less interesting and took less away from those sections

[Herman Østensen · Rating 5 out of 5]

Pragmatic approach to Porter’s five forces. I like it

- “in industries with no barriers to entry, competition will eventually make the reproduction value of the assets equal to the value of future earnings.”

[Bunmi · Rating 5 out of 5]

Surprisingly easy to read, and very enjoyable.

[Brian Pupecki · Rating 5 out of 5]

Best book I’ve encountered on business strategy and understanding the competitive dynamics between companies in any given industry using real world examples with companies like Walmart, Intel, Microsoft, and many others. Does get repetitive and drags on a little near the end but still an essential read for anyone interested in analyzing companies be it for managing or investing.

[Vignesh Yelluri · Rating 5 out of 5]

My first book on business. From 0% knowledge, I was able to understand a great deal about how businesses fight for survival and what has to be done to make a business successful.

Indeed, Businesses are modern warfare. Either they fight / form alliances / interestingly also settle for a peace deal.

[Daniel · Rating 4 out of 5]

My key take-aways for this book are:
• Strategy is outward focused; on the actions of other economic entities
• It is almost impossible to excell in strategic thinking without clarity
• Operational Efficiency is important for profitability – but it is not strategy
• The most important competitive force is «barriers to entry»

Mr. Greenwald is a professor at Columbia University in NY and have for many years been teaching the «Economics of Strategic Behavior» MBA class. I heard about this book through a guest lecturer on M&As in my Corporate Finance class at NTNU last year. We were told that this book gives a simplified and much more clear view of what strategy is all about.

Greenwald makes the case that: «At it’s core – strategy is about creating, protecting and exploiting competitive advantages». And by competitive advantages, he means concrete factors that enables some companies to achieve extraordinary profitability over an extended period of time. In order to identify and manage such factors, he develops an extremely logical and practical framework for thinking about strategy – but as the title indicates: in a radically simplified way.

When reading the book, I would suggest using some time to really grasp the first chapters about strategy and competitive advantages. These form the basis for the rest of the book. There are multiple chapters with detailed case studies, which are very relevant if you want to practice strategy. In fact, many of them are solutions to Harvard Business School cases.

At times, the book can be a bit dull to read. But this is just from the fact that it is a «school book». Other parts are really interesting and fun because the book is some what old. I.e. the case studies of Apple are from year ~2000, and Greenwald concludes: «In the PC industry, Apple is going nowhere» (loc 1197). In retrospect this makes the analysis even more interesting and it shows that no matter how logical something seems at a particular point in time, we can not predict the future with certainty.

I recommend the book to everyone with interest in competitive strategy.

[Joe Cosentino · Rating 4 out of 5]

I picked up this book because I'm currently taking Greenwald's class at Columbia Business School. I found the analysis in this book very sharp, and most of the case studies very relatable and enjoyable. The book centers around a fairly powerful premise - that the only strategic "force" (of Porter's famous 5 forces) that matters is barriers to entry. The first half of the book introduces this idea via case studies indicating the sources of barriers to entry (and thus competitive advantage) and the strategic analysis process that one should undergo to identify the existence of barriers to entry. While some of the cases are a bit dated (he is very harsh on Apple Computer in the early 2000's - pre iPod/iPhone and presumably pre any competitive advantages), the analysis is tight and easy to read. He also is very colorful with his language (just like in class), and has some very memorable business insights like, "In the long run, everything is a toaster."

In the second half of the book, Greenwald focuses more on the competitive interactions between firms (primarily in olligopolous industries where barriers to entry exist). Here we get a really good introduction to game theory, and have some high-profile cases to follow like the "Cola Wars" between Coke and Pepsi and the collusion between the Sotheby's and Christie's auction houses. And of course, as a lifelong value investor ("The guru of Wall Street's gurus", apparently), Greenwald includes a really great chapter on firm valuation and the implications of strategic dynamics of a firm. This chapter is worth reading for all interested in long-term value investing.

Overall, I really enjoyed this book - a great read for anyone interested in business strategy.

[Tyler Fitt · Rating 2 out of 5]

Read it because it was recommended to me by a friend, I do say that my review is a little bias as I have recently completed a course on strategic management at my university. That being said I found a lot of the information to be somewhat common sense. Didn't learn anything new really.

[Mourisham Jose · Rating 5 out of 5]

Five star reading. Classic Greenwald

[InvestingByTheBooks.com · Rating 5 out of 5]

We all admire Michael Porter for his wisdom regarding strategy. But how do you use his recommendations in real life? Especially if you are an outsider, you need a toolbox that is easier to use and maybe more focused. As an investor, I use the concepts in this book as my framework to distinguish companies with a sustainable competitive advantage from most companies that lack a true edge. But every manager will find Competition Demystified useful as well. “Understanding the significance of barriers to entry and how they operate is the key to developing effective strategy”.
One can learn a lot. What are the genuinely important factors that separate good from ordinary businesses? What is needed for a sustainable competitive edge? Is differentiation a value creating strategy? And how do you use corporate strategy in your valuation approach?

My favorite chapter is about economies of scale, Big where it counts. Most prefer high market shares, but few understand it’s really about local efficiency. The Wal Mart/Coors case exemplifies this perfectly. After reading this, we ought to be more afraid of companies expanding into new markets. RONIC – Return on New Invested Capital - will probably be lower than current ROIC for companies without an edge.

Market position is key for long-term profitability, usually together with either proprietary technology or customer captivity. Proprietary technology protected by patents is a strong advantage, but with a deadline. Personally, like Warren Buffett, I am somewhat skeptical to the long-term story when the current excess returns are a function of patents. Will they be as successful during the next product cycle? I feel safer with “search, switch and habit costs” – my bet is usually that the period with competitive advantage will be longer here. But it is still not easy. This book will help your decision-making in this regard.

Bruce Greenwald is Head of Research at FirstEagle Funds and Professor at Columbia, especially well known for his Value Investing Class. Few match his knowledge in Value Investing and Corporate Strategy. FirstEagle has, as long-term value investors, an enviable track record, partly thanks to of the concepts in this book.

Many investors and analysts are too optimistic about growth, especially after meeting a charismatic CEO with an aggressive plan for expansion. He will probably achieve growth, but will it be profitable? “Without competitive advantages, investments will generally return the cost of capital, meaning they will not add any value for the existing owners.” This is a most important lesson.
Without being certain the company got some of the sustainable competitive advantages in this book, I never add any value for growth to earnings power value (i.e. to the value of a company’s current earnings, properly adjusted).

Competition Demystified brings you to a new level of understanding why and when strategy matters. And it’s an easy read too. It’s the best strategy book so far. It was even better the second time I read it.

[Julian Dunn · Rating 3 out of 5]

A bit of a mixed bag. The book's central thesis is that successful competition in a market is chiefly attributable to barriers to entry; if barriers to entry are high, then incumbents have a tendency to retain their competitive advantage. Kind of a no-brainer. The problem is that such a principle is easy to bandy about in an academic context (and the authors are academics) but extremely difficult to apply in real-life business scenarios. Game theory like prisoner's dilemma are easy to reason about when the number of variables are small and the consequences are highly predictable, but we know that the real world isn't like this. As with most academic literature on these topics, it's often hard to see how to translate high-level concepts into practical reality. Accordingly, much of the middle of the book is a bit of a snoozefest.

I found some of the material in the later part of the book concerning M&A as well as realistic company valuation (discussing the weaknesses of DCF and moving beyond it) to be quite valuable. While I disagree with the authors' over-emphasis on cost cutting as the only true justification for business combinations, they do rightly call out that most M&A is not justifiable by any financial measures. Or more importantly, that even the apex of the zone of uncertainty about the value of potential synergies could not justify the amount of goodwill that an acquirer often takes on. There are many other (qualitative) reasons to conduct M&A that the authors don't address, given that they are rigorous, quantitative academics. One exception to their bias towards the quantifiable concerns venture capital where they admit that, ultimately, venture is about investing in teams rather than businesses.

Overall, a few good tools, but only about 10-25% of the book was useful to me.

[Shraddha Pant · Rating 4 out of 5]

I started this book shortly after reading "Understanding Michael Porter" by Joan Magretta, in which the author casts light on how to understand porters' five forces and the implications of each force in the business and the consequent strategy to devise for the businesses.

When I started the book, I was disappointed to learn that the author - Bruce C N Greenwald would try and belittle the five forces framework by Porter and given that I had recently been impressed with the depth at which Joan elucidated Porter's work, I started the book on a rather grim note. However, as I proceeded further, I grew into appreciating the idea that among all the forces in Porter's framework, the most important one is Entry Barriers, which determines the profits that the incumbent firms enjoy. Based on the premise that barriers to entry is the most important force that shape up competition and industry returns, the author goes on to cast light on the nuances of strategy that are sensible when the entry barriers are present/absent.

I particularly enjoyed reading chapter 16 through the end, as the author delves into the shortcomings of NPV method of assessing firms' (or project) values then points out importance of understanding porters' five forces along with the relevance of business (growth) in the future to make more logical assessment of a business's value.

I am glad that reading the entire book (as opposed to leaving it after my initial disappointment) turned out to be the right choice. This book is a good read for any one that is interested in understanding why businesses do well at the fundamental level and the relevance of strategic approach to valuation of a business. Happy reading!

[Ugh · Rating 5 out of 5]

I thought this was excellent. If you're an amateur investor in individual companies, or are thinking of getting into that, you're going to need a way of sorting the wheat from the chaff. You could attempt that based purely on past financial performance, but then you'll be in the dark whenever the company or its competitors announce any new strategic initiatives, such as a product launch or an acquisition. Is such a move promising or a worry?

This book is not written overtly for investors, but if you've read the investment basics and want to know more about the qualitative side of things, I think it's great. It looks at what factors give companies defensible advantages, and how managers should behave if their company or competitors have such advantages, or don't. It also puts this in the context of qualitative outcomes, chiefly the return on invested capital. As such, it's a superb companion to books like Terry Smith's Investing For Growth, which look more at the quantitative side than the qualitative.

Given the publication date, the case studies are old but they struck me as still applicable. For example, Apple grew to be one of the world's biggest and best companies when it developed the iPhone after this book was published, but prior to that it was a struggling ant in danger of being trampled by the Microsoft elephant as a low-margin assembler of computers with a small share of the software and operating system markets, which is the period this book examines.

It's clearly written and engaging, if you're into this sort of thing. A must-read, I reckon.

[Firsh · Rating 4 out of 5]

I think when it comes to moats, there are better books on the subject in scope of you being an individual investor and trying to find targets. But nevertheless the book was interesting and it would be the most useful for bosses or entrepreneurs who have employees and or run big corporations. Because it's more like a leadership book than an investing book. Like it gives you actionable advice that you are just not going to implement if you are just a common shareholder of a company. And stuff like this is just not that adaptable if you are a solo entrepreneur. It's not the first book that I've read that has had Bruce Greenwald's name on it. He is okay, but it's not my favorite book, far from it. But it is worth reading. don't know how you can call something radically simplified if it's 400 or more pages. So it did take a while to go through it even on 2 or 2.2x speed in the audiobook which was flawed because some chapters ended with a few words chopped off at least in my version which is a bit annoying but it happens. What's interesting is the book was old, I mean the original publishing is like 20 years ago, and how it shunned Apple and praised Intel. And look how that turned out. So I would take it with a grain of salt. Because if the authors thought that was the good way of evaluating being a leader in a competition, then the process might have been flawed because things turned out the other way around (or they failed to recognize how much of a moving target the tech industry is). They focused too much on the companies that were prominent at the time, few of which survived 20 years later so... The book has brought up usual stuff like the Prisoner's Dilemma, Network Effect, and the Airline Industry, Kodak. Damn I feel old for remembering my dad buying Kodak films for analog cameras. But overall I have read way better investing books related to competition and moats, corporate actions. But this was still nice.

[Stephen Hemingway · Rating 4 out of 5]

Very readable, but somewhat dated now.
The one thing I took away from this book which was somewhat of a surprise was that a competitive advantage is really difficult to sustain when you have a large part of the market, but is relatively easy for a very geographically contrained market.

So, you can get a sustainable extra return on capital from a corner shop more readily than from being Amazon.
This sounds counterintuitive at first, but when you consider that Amazon has basically never made any money from its retail operations, it begins to make sense. (Amazon does make a lot of money from AWS, which is a relatively new business, but its original template of selling books and easily mailed objects via a website is easily copied and has never really made money.).

Being a bit out of date, one can read this with a critical eye. One part seems to argue that Apple's very hybrid strategy was doomed, relative to the laser focus of Intel. With the benefit of hindsight, we can see that this did not exactly pan out!

[Terry · Rating 4 out of 5]

This is a book about how to analyze competitive advantage.

Some key points:
1. Three sources of competitive advantage (supply, demand, economy of scale)
2. Confirm whether a firm has competitive advantage - stable market share, high ROIC
3. Barrier to entry > differentiation
4. Economy of scale
- not on absolute size, but on relative, market share
- small market is more easy to build economy of scale
- growth is the enemy
-
5. What is not competitive advantage (access to capital, talents, labor, technology (in the long run, everything is a toaster)), pure branding
6. What is competitive advantage
- Habit
- Switch cost
- Search cost

But I wish there’s an updated version of it, because all the cases are from 20 years ago, some of them have already continued to play out in a way that Greenwald didn’t expect.

[Phillip Keefe · Rating 3 out of 5]

At the beginning of the book the author references a quote by Einstein as the foundation of his revision to Porter's work: "Make things as simple as possible, but not simpler." Having just read Porter's Competitive Analysis prior to this, Greenwald really stripped out a lot and make it simpler (not for the better). I can appreciate his focusing on a subset of the original five forces, but he didn't do very much with the space he freed up. Just redundant case studies. I appreciate that we attempted to provide ways to address markets with competitive advantages, through game theory and simple decision trees, but these were almost too rudimentary to be practical. If it were me, I'd have cut out much of the case studies and in their place a more detailed prescription to competitive situations.

But not disappointed to have read.

[T. Laane · Rating 4 out of 5]

A book about barriers to entry in business and how to do it correctly (with a lot of bad examples). A lot of stories from 20th Century about different business categories and new emerging players as examples in barriers to entry. A lot of bloody battles usually with no winners. But with some good examples (like Fox) how the correct strategy has to be played out as a newcomer. Don't step on any toes and only eat the scraps… the old players have to be sure there is no financial point in battling you. Stay low. Until you are big enough to eat the other contestants. But yes, many years of niche faking.
BTW it's always nice to hear a book from 2007 estimating the downfall of Apple and not knowing about the iPod "next Gen" vision = iPhone :)

[Xiangjie · Rating 5 out of 5]

Clearly explained what is competitive advantage - demand, supply and economy of scale. The most sustainable is economy of scale combined with customer captivity.
And valuation that reflect competitive advantage analysis, from balance sheet, to current earning power to growth, which is only good when competitive advantage exists. It also extend this logic to evaluation of M&A, venture and brand extension.
When there is no competitive advantage, management matters and the focus should be on operational efficiency, which could sustain long-term superior return and may change rapidly when management focus elsewhere.

[Gokmen · Rating 5 out of 5]

Written in a way that is clear and easy to understand, full of real life business examples, both good and bad, involving competitive struggles of well known companies and industries. Written in 2005, I wish it gets an update to reflect examples of the business landscape during and after the financial crisis followed by the rise of tech companies and digitalization in 2010s all the way up to 2022 with multiple companies entering the trillion dollar club. Otherwise it’s a book with full of business wisdom that can be read more than once and also used as a reference by chapters of specific interest.

[Jaidev Shah · Rating 5 out of 5]

As the cover says a radically simple way to run/buy/understand a business. I would rank this book amongst the top 5 business strategy books that I have read. The authors take the pain to explain each scenario in simple terms. Some of their statements are short but hold a huge amount of strategic meaning. I have learnt a lot from this book.
I took a while to read this book because it forced me to think of my decisions in business. I re read the first 4-5 chapters.
I think this book could be one of the go to books for an investor or business owner.