Michael Porter's Competitive Advantage 2

From the suppliers, one gets all the tools to make a "pizza." If one decides to go with a franchise, one gets the advantage of the low-costs that are extended to the franchisor. However, one also has to pay franchise fees (advertising fees, royalties). If one decides to create a "unique" pizza store, one can expect to pay higher costs. The Brick Oven Pizzeria next to the Majestic Theatre in NY (John's Pizzeria) is an example of a Pizza store that offers superior pizzas at a reasonable price. I believe that at one point, they may have charged higher price, but the store has generated such a high volume of pizza sales that it was able to significantly lower the costs of the suppliers, even with the superior tools to make their pizzas. So even if one goes into the "uniqueness" market, one may be able to reduce costs over a period of time in such a manner that the volume one generates through the lowered price of the "pizza" may be more profitable than keeping the higher price.

Now, I must stress here that whether one is running a "unique" pizza store or a franchise, one must aggressively try to cut costs to the minimum without compromising on the quality.

Substitute pizzas would be pizzas bought from supermarkets, gas stations, etc. Substitutes are always in the low-cost market and offer something for price-sensitive, on-the-go customers.

Now, Porter sees the forces of the customers, suppliers, substitutes, and the threat of new entrants as the main forces shaping a business industry. Even with the advent of the Internet, this is very true. The most successful businesses on the Internet are low-price businesses like Amazon, etc. Low-price is one business strategy that gives one a competitive advantage over other businesses. Another is "uniqueness" which carries with it a premium price. Apple Computers with its focus on design and user-friendliness would be an example of a "unique" business with a mass-market appeal (user-friendliness). So again, a unique business is not always a high-end, upper-class business focused on status (BMW, Mercedes, Lexus). A unique business with the money that it generates from unique products can move into the mass-market with a more secure financial footing than other businesses and an appeal that betters the industry as a whole.

My first criticism of Michael Porter's conception of the "unique" would be to ask, "What do you mean by unique?" Of course, uniqueness would mean that it is a product of superior quality, that it is a product that cannot be reproduced, and that it will be able to command a premium price for years onward since its "trade secrets" are kept under a wrapper that is inpenetrable.

Now, Microsoft Founder, Bill Gates and Apple Co-Founder Steve Jobs are often hailed as the visionaries of the Personal Computing World. It was the invention of the Windows Systems (which has now become outdated) which made the personal computer possible in many ways. But they basically stole the idea from Xerox copiers and then improved on it.

Facebook Founder, Mark Zuckerberg, basically stole the idea of a college social networking site and made it into something with a mass, cool appeal. Was that really a unique act? Perhaps Michael Porter would say the "uniqueness" does not have to be the product itself, but some valuable part of the "value chain" that creates uniqueness (Henry Ford's assemble line, etc.).

I was recently watching tv (I rarely watch tv), and an FBI agent was saying that next to the terrorism threat, the second biggest threat to America is industrial espionage (foreign businesses stealing trade secrets of "uniqueness" industries). It is a very serious threat, but it is not neccessarily a foreign threat. It can just as well be an internal threat... someone from Pepsi stealing the formula from Coke.

Marxist influenced by Darwin would say that there is no individuality (the Uniqueness personality market... celebrities, music stars, etc.), everything has to do with adaptation to environment and class struggle. The ones who succeed are the ones who create an environment that most nurtures their instincts of dominance and power and hide it under a cool veneer.

Germans developed the BMW and Mercedes as a performance vehicle that adapted well to auto-bahns and the small, challenging roads of Germany. Could the BMW or Mercedes have been created anywhere else? Of course, the German tradition of excellence and efficiency were factors in the value chain that gave a premium value to the BMW, Mercedes.

There are two basic ways of thinking of individuality. One was is to think of humans as unique creations of God, created in his image. And yet, we struggle with God because we cannot understand how there is so much evil in the world when God is all-good, all-powerful, and all-knowing. One solution is to say that human beings create evil and this is certainly true, but that does not resolve the tension. In the space of this tension is "individuality." I think religions that stress "submission" are totally missing the point.

Another way of thinking about individuality is to think of it as a "contest." We see many sports team compete for the title of "Champion of the World." Competition sharpens us and makes us shape strategies to gain a competitive advantage. The best team wins the Title of "Champion of the World."