Greenwald lays out what he calls a simplified theory of competitive strategy," followed by analyses of a number of real-life situations. While the theory usually makes sense, Greenwald's application is not always as compelling.
"Competition Demystified" begins by observing that for at least the last half century, strategy has been a major focus of management concern. Sometimes enormous consequences flow from decisions not even thought to be strategic - eg. IBM's outsourcing creation of its PC operating system and CPU manufacturing. Regardless, effective strategy is central to business success.
Greenwald says that the first issue is selecting the arena of competition, and the second involves management of external agents. Barriers to entry is the area one should focus on first, and primarily in these analyses. If there are no barriers many strategic concerns can be ignored - the only option is to focus on being as efficient and effective as possible.
Greenwald believes that competitive advantages that lead to market dominance are much more likely to be found in a local arena (either geographic or product space). Further, there are only three kinds of genuine competitive advantage: supply (privileged access, proprietary technology protected by patents or experience), demand (eg. psychological or actual costs of switching - includes branding, loyalty programs, laborious setup and coordination issues), and scale economics.
An elephant (vs. ants) with a competitive advantage has as its priority to sustain what it has, and must recognize the sources and limits of its competitive advantages. Alternatively, companies with a competitive advantage may have potent competitors (eg. Coke - Pepsi, Boeing - Airbus). In this situation strategy formulation is most intense and demanding. They need to know what those competitors are doing and anticipate reactions to moves the company might make.
A common managerial axiom is to avoid commodity businesses - differentiate. However, Greenwald says that this doesn't work - Mercedes and Cadillac are clearly differentiated products, but their high original returns attracted new entrants (Lexus, BMW, Accura) and they now earn only average returns. (Another alternative is for existing competitors - eg. Lincoln - to expand; Lincoln, however was not successful in accomplishing this.) "Competitive Demystified" also notes that over-capacity, especially in a capital-intensive area - airlines, can create long-term poor profits. (This contradicts Southwest Airlines' success.)
Simple products and processes are not fertile ground for proprietary technological advantage. These are hard to patent (looks like "common sense") and easy to transfer (competitors could hire away employees). Similarly, technological advantages primarily provided by consultants or suppliers cannot be markets with substantial competitive advantages provided by technology.
The best strategy for an incumbent with economies of scale is to match the moves of an aggressive competitor - be they price cut, new product, or new frill. Any market share lost to rivals narrows the leader's edge. (Alternatively, competitive advantage based on customer captivity or cost advantages is not affected by market share loss.)
Greenwald believes that only a few industries have scale economies that coincide with global size - eg. Microsoft, Intel. Most are local. Meanwhile, growth of a market is generally the enemy of advantages based on scale.
Then, we come to application problems. My guess is that if American Airlines, etc. had tried to match Southwest's early fares in Texas (Greenwald's recommendation) they would have been found guilty of predatory practices under anti-trust laws, and severely hurt themselves economically in any case.
Greenwald comments negatively at length on Wal-Mart's decision to go national, pointing out that its financial returns fell when it did so, because its competitive advantage was mostly through local saturation, and not squeezing suppliers or superior distribution, etc. However, I cannot help but believe that if Wal-Mart had remained a regional phenomena it would not have the supplier leverage it has (Greenwald's financial review of this topic was overly superficial, at best); regardless, it would have been bought by a larger competitor (eg. K-Mart, Sears) and then probably atrophied in an alien management climate. Further, it probably would not earned sufficient funds to develop its computerized management systems for store replenishment and inventory control.
In Wal-Mart's case Greenwald forgot a basic rule of economics - maximum profits are reached by expanding until marginal revenues meet marginal costs. In addition, my understanding of the stock market is that maximum share price is attained through strong, steady profit growth (even if incurred at declining rates).
Other analyses within the book can be similarly attacked. My conclusion is that strategic planning is MORE complicated than Greenwald tries to make it out to be. Nonetheless, his book does provide useful background.