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This book is a revelation for everyone seriously involved in any part of the business world. I usually do not write reviews, but this book deserves appraisal and much more attention from stakeholders in business.
Based on his extensive knowledge gained through his career in investment academia, Bruce Greenwald authored a brilliant book which provides a general framework for analyzing competitive situations and their possible outcomes and impact on the involved firms. Beginning with a general introduction to strategy and tactics, Greenwald first pays tribute to Michael E. Porter's 5-Forces-Model and explains his approach to strategy by building on the groundwork of the Porter's model. However, a serious disadvantage of Porter's model is its complexity, which results in a difficulty of applying the model on competitve situations due to the exhaustive analysis required, i.e. keeping an eye on every force at all times during the analysis will inevitably confuse the analyst. Greenwald solves this dilemma by solely focusing on one force: Barriers to Entry. These barriers form the basis for every other force and define the market, in which the firm operates. Without barriers to entry a firm cannot develop and enjoy sustainable competitve advantages over the long term. Therefore, barriers to entry are a crucial part of economical decision-making for the firm and a useful analytical tool for quick-checking the competitive surroundings.
What makes this book a great read is the fact that Greenwald uses many real-world competitive situations (Wal-Mart, Microsoft, Apple, Polaroid etc.) to illustrate the framework's applicability.
However, the biggest merit of this book is the investment valuation approach described in the last part of the book. This investment valuation approach is a powerful alternative to the established valuation models (e.g. Discounted-Cashflow-Model) used in today's financial world, because it includes the importance of strategic decision-making in the valuation process. Furthermore, the investment valuation model is not future-oriented (in contrast to the DCF-model), resulting in a dramatically lower error rate and smaller valuation range compared to other models, which are highly sensitive to variations of critical variables. This model is congruent with the value investing philosophy; accomplished investors such as Warren Buffett and Seth Klarman developed their individual approaches similar to Greenwald's model.
For me personally, this book constitutes one of the most important books of the investment world. Competition Demystified stands out because of the analytical tools and general approach to investment theory. This book definitely deserves a place next to Benjamin Graham's "The Intelligent Investor" (Side Fact: Bruce Greenwald is the successor emeritus of Benjamin Graham as a professor at Columbia Business School in New York).
Some recommendations for potential readers: - Regard this book as the transcript of university lectures, i.e. try to study and really comprehend the content. - Don't rush through the book, let it sink in and use it as a toolbox for thinking about economy at large and investment in particular. - Spread the word to improve the quality of economical decision-making in today's world (especially in consulting, investment banking and management).
Carefully read the first half of this book a couple times and you can expect to deeply internalize the most general, enduring principles of analyzing competitive advantage and entry barriers.
This book's value is its simplicity. There's nothing groundbreaking here. Greenwald's got no axe to grind, no TED-talk tailored concept to (over) sell. The ratio of insight to fluff is very high, so you'll actually remember what you read.
Non-practitioner's won't grasp how valuable a simple, deeply internalized analysis framework is. Researching a company you know nothing about- cracking open a fresh 10-K - can be overwhelming. A simple framework focuses your attention, let's you filter out the noise, and zoom in on the pertinent.
Porter's five forces isn't wrong, it's just excessive and distracting. Sure, it's nice for an MBA assignment: go analyze company X on these five dimensions. But if the lesson learned is that equal effort should be expended analyzing "supplier power" as "entry barriers", then the student has been deceived.
Scholars love excessive complication. I recall the corporate finance section of the CFA exam, wherein project go/no-go decisions depend on said project's stock market Beta, with calculations carried out to the decimal point. All this "rigor" for calculating project discount rates despite the empirical fact that Beta doesn't work. It's not just slightly wrong. It gets the *sign* of the covariance-return relationship wrong. Amazing.
My point is that Greenwald runs counter this tendency. He cuts away the baloney, ignores the auxiliary, and solidifies the foundation of competitive analysis.
*The second half of the book, which deals with strategic interaction, isn't vital. It feels like Greenwald threw it in because his publisher wanted a longer book.
Libro de estrategia con muchos casos prácticos que se resume en lo siguiente:
Si la empresa no tiene ventajas competitivas tenemos que basarnos en ser eficientes, no nos queda otra. Si tiene ventajas competitivas y somos los únicos tenemos que conseguir mantener el monopolio y estar siempre alerta. Si somos varios competidores con ventajas competitivas entonces tenemos que utilizar la estrategia.
Trata conceptos muy interesantes de estrategia como el dilema del prisionero y la cooperación. También conceptos como M&A y que lo más importante en las adquisiciones es conseguir un ahorro de costes por parte de la matriz. En mi opinión es un libro muy útil también para emprendedores.
Las pegas es que muchos de ellos están anticuados ya que son todos de finales del siglo XX. Por otro lado, la cubierta y la calidad de las páginas es bastante mejorable, no creo que costará imprimirlo en mejor calidad. Sin embargo, la calidad del contenido es innegable y si no fuera por lo anterior le pondrá 5 estrellas.
Competition demystified é um dos melhores que li sobre aplicação de microeconomía na tomada de decisão prática. Aconselho o uso dele como leitura suplementar em aulas de microeconomía e organização industrial.
Overall the book does have some useful points and case studies but the way it is written is overly complicated and hard to understand. Keep it simple and have short sentences. Don't try to be too verbose - just makes it a headache to read.
Still in the process of reading it, loved it so far!
However on another note, the paperback quality is laughable (hence the 3/5) for an expensive book such as this. Even the cover is made of thin paper! The quality of the pages and printing are pretty poor. Not sure if I got the authentic copy or if this is the norm for this particular publisher
Although the case stories were often quite old this was a very throroughly grounded book and made some real contributions to strategy theory by integrating strategic analysis, economic value and game theory in a deeper way than in my own PHD on linking the two which two decades ago made real progress on this richly complex area.It did a very deep critique of more naiive valuations of businesses and strategies using EVA although I would differ a bit in their possibly over prudent suggestions on how to frame the assumptions.I will be using this debate on my next course! They were spot on in highlighting how often growth destroys shareholder vaue- Dr Tony Grundy
Zuerst zum wichtigeren: Der Inhalt des Buches ist okay. Er reduziert und vereinfacht seine Analysen recht stark, was aber natürlich auch sein Ziel war. Der Ansatz der Vereinfachung an sich ist eigentlich gut. Dass daraus dann eine wirklich gute Analyse entsteht, mag ich jedoch nicht zweifellos annehmen. Es hängt also recht stark davon ab, was man mit der Analyse anstellen will.
Nun zu der schlechten Seite, die mit dem Inhalt rein gar nichts zu tun hat: Als das Buch ankam, war der Buchrücken total zerfetzt, weil der Lieferservice das Päckchen mit einer solchen Gewalt in den Briefkasten gedrückt hat, dass es kaputt ging. In Folge dessen bestellte ich ein Ersatz, welches exakt genauso misshandelt in meinen Briefkasten gestopft wurde, obwohl es massig Möglichkeiten gibt, das Buch jemandem zu geben oder in einer Verwaltung abzugeben. Diesen Kauf habe ich dann auch storniert. Einen Ersatz konnte ich nicht mehr auswählen, nur noch Geld zurück. Jetzt stehe ich ohne das Buch da und habe zweimal den Aufwand gehabt das Buch zu verpacken und wieder zurück zu schicken. Diesbezüglich bin ich massiv enttäuscht.