I’ve been doing a series on Michael Porter’s Competitive Advantage book and the value chain analysis framework. Specifically, I’m using Clorox, Procter & Gamble, and Method Products to provide slight more concrete examples of Porter’s generic strategies and how to analyze them. The value chain is an odd framework in that Porter uses it to conduct at least two different analyses, for cost advantage and differentiation. The value chain approach to disaggregating what a company does is similar in both, but from there the two analyses diverge. In this post, I’ll be doing a deep dive into cost analysis. This type of work is especially important for figuring out whether a competitor has a true cost advantage (one of Porter’s generic strategies) and also for analyzing your company and competitors in general.
In my last post, I held Clorox up as an example of a cost leadership strategy, but I have realized since that I was wrong. The company is actually pursuing more of a differentiation strategy. See the Clorox background section below for details. Nevertheless, let’s use the company as an example for a cost analysis. Along the way, we’ll also compare them with Procter & Gamble and Method Products to continue to add more depth to our understanding of the overall value chain analysis.
This post is a long one, so my feelings will not be hurt if you choose to skim it. Think of it as a reference work. Continue reading Competitive Advantage by Michael Porter, Part 3