Michael Porter

In: Business and Management

Submitted By khya
Words 7414
Pages 30


I. Operational Effectiveness Is Not Strategy
For almost tv^fo decades, managers have been learning to play by a new set of rules. Companies must be flexible to respond rapidly to competitive and market changes. They must benchmark continuously to achieve best practice. They must outsource aggressively to gain efficiencies. And they must nurture a few core eompetencies in the by Michael race to stay ahead of rivals. Positioning-once the heart of strategy-is reject- ! ed as too static for today's dynamic markets and changing technologies. According to the new dogma, rivals can quickly copy any market position, and competitive advantage is, at hest, temporary. But those beliefs are dangerous half-truths, and they are leading more and more companies down the path of mutually destructive competition. True, some barriers to competition are falling as regulation eases and markets become global. True, companies have properly invested energy in beeoming leaner and more nimble. In many industries, however, what some call hypcrcompetition is a self-inflicted wound, not the inevitahle outcome of a changing paradigm of competition. The root of the problem is the failure to distinguish between operational effeetiveness and stratHARVARD BUSINESS REVIEW N,)vt;mbt;r-D(.ct;mbi;r 1996

What Is Strategy r

egy. The quest for productivity, quality, and speed has spawned a remarkable number of management tools and techniques: total quality management, benchmarking, time-based competition, outsourcing, partnering, rcungineer'ing, change management. Although the resulting operational improvements have often E. Porter ^^^^ dramatic, many companies have been frustrated hy their inability to translate those gains into sustainahle profitahility. And hit by bit, almost imperceptibly, management tools have taken the place of strategy. As managers push to…...

Similar Documents

Michael Porter, What Is Strategy (Detailed Synthesis)

...Adrien LAFARGUE Michael Porter, What is Strategy? I know it is not really what you were asking for but perhaps you will value it. Actually, I found the text so interesting that I have made a real learning work on it. Because it took me 10 hours I am a little bit short to write the 200 words summary and comments you are asking for, but I am sure your only purpose is to check that we are working, and I believe this will convince you. **All the sentences written in this document are extracted from M. Porter’s article. I have “only” proceeded to a reorganization and clarification of the concepts, arguments and examples. I. Operational Effectiveness is not Strategy Operational effectiveness and strategy are both essentials to superior performance, but are two different areas. Operational effectiveness (OE): It means performing similar activities better than rivals perform them. It includes efficiency, but is not limited to it. It refers to any number of practices that allow a company to better utilize its inputs by reducing defects in products or developing better products faster for example. In contrast strategic positioning means performing different activities from rivals or performing similar activities in different ways. Operational Efficiency leads to cost advantage: Cost is generated by performing activities, and cost advantage arises from performing particular activities more efficiently than competitors. All differences between companies in cost or......

Words: 6081 - Pages: 25


...differentiation strategy, using its unique capabilities in story-telling and animation to produce signature animated movies that are hard to copy, and for which customers are willing to pay to see and own. Apple also targets the mass market with its iPhone and iPod products, but combines this broad scope with a differentiation strategy based on design, branding and user experience that enables it to charge a price premium due to the perceived unavailability of close substitutes. [edit]Recent developments Michael Treacy and Fred Wiersema (1993) in their book The Discipline of Market Leaders have modified Porter's three strategies to describe three basic "value disciplines" that can create customer value and provide a competitive advantage. They are operational excellence, product leadership, and customer intimacy. [edit]Criticisms of generic strategies Several commentators have questioned the use of generic strategies claiming they lack specificity, lack flexibility, and are limiting. Porter stressed the idea that only one strategy should be adopted by a firm and failure to do so will result in “stuck in the middle” scenario.[3] He discussed the idea that practising more than one strategy will lose the entire focus of the organisation hence clear direction of the future trajectory could not be established. The argument is based on the fundamental that differentiation will incur costs to the firm which clearly contradicts with the basis of low cost strategy and on the......

Words: 2128 - Pages: 9


...Porters The Airline is one of the major industries in the world today and is majorly affected by Michael Porter's "Five Forces" model. The following write up conducts an analysis on how the model affects the airline industry today. The central force of Porter's model is Internal Rivalry within the Industry. In case of the Airline industry, this is the most important force today, especially since the market is completely saturated. There are more service providers than needed in both local as well as international markets. The various airlines are competing for the same customer, which also results in strengthening the buyer power, another of Porter's forces. Moreover, a lot of airlines such as Qatar Airways and Emirates have a brand name which they have to defend so they compete in doing so. The airlines are continually competing against each other in terms of prices, technology, in-flight entertainment, customer services and many more areas. The net result of this competition between companies is an overall slow market growth rate. One of the forces that Porter describes is Entry into the industry. In the world today, the airline industry is so saturated that there is hardly space for a newcomer even to squeeze its way in. The biggest for this is the cost of entry. The airline industry is one of the most expensive industries, due to the cost of buying and leasing aircrafts, safety and security measures, customer service and manpower. Another major barrier to entry is......

Words: 334 - Pages: 2

Michael Porter

...MICHAEL PORTER VENTAJAS COMPETITIVAS En el capitulo 1 de “La Ventaja Competitiva” de Michael Porter”, se plantea la ventaja competitiva como un modelo eficaz para formular la estrategia que permite a las organizaciones tener una mayor rentabilidad y ser menos vulnerables si entienden las cinco fuerzas de su entorno. Porter encontró que estas fuerzas determinan la posición de una empresa frente a sus competidores: -Amenaza de nuevos competidores: Las organizaciones ya establecidas pueden sentirse amenazadas por nuevos competidores de su industria, lo que podría llevarlos a mantener los precios bajos y aumentar su nivel de inversión. -Poder de los proveedores: Los proveedores grandes y poderosos pueden fijar precios altos, limitar los servicios o la calidad y cambiar los costos a sus clientes, conservando así mas del valor para si mismos. La concentración de los proveedores y la disponibilidad de proveedores sustitutos son factores significativos para determinar el poder del proveedor -Poder de los compradores: Los clientes poderosos, el reverso de los proveedores poderosos, pueden obligar a reducir los precios, exigir una mejor calidad o servicio y hacer aumentar los costos para la organización que provee. -La amenaza de los sustitutos: Los cambios del costo, nuevas tecnologías y tendencias sociales pueden influir en el poder de las alternativas y sustitutos para un producto o servicio, lo cual desviara la lealtad de los compradores y otros cambios del entorno.......

Words: 531 - Pages: 3

Michael Porter Contribution

...effective strategies that result in improved competitive. Technology has now made it so easy for competitors to match one’s product within a short space of time. Changes in customer tastes and preferences require robust systems and strategies to maintain current market share profitably and ensure growth. It is within this spectrum that Michael Porter has become a well-known contributor in the field of strategic management as he shades light on which elements to consider in coming up with a strategy for both domestic and international markets. A good strategy will result in the creation of a unique and valuable position, involving a different set of activities. Strategic position emerges from three distinct sources which are serving few needs of many customers, serving broad needs of few customers and serving broad needs of many customers in a narrow market. After positioning itself, an organisation must ensure that its strategic efforts results in creating “fit” among a company’s activities. Fit has to do with the ways a company’s activities interact and reinforce one another. In his endeavour to build strategic intent within organisations, Michael Porter is well known for the following contributions in the field of corporate strategy: 1. Generic Strategies 2. Value Chain 3. Competitive Advantage 4. Porter’s Diamond 5. Five Forces Model 1. Porter’s Generic Strategies Porter’s generic strategies is a frameworks used to outline the three major......

Words: 4555 - Pages: 19


...Las 5 Fuerzas de Porter Por: Rocío Herrera Ma. Belén Baquero Agenda ? ? ? Cinco Fuerzas de Mercado Barreras de Entrada de Productos Sustitutos ¿Cuándo se utiliza el análisis de las 5 fuerzas de Porter? Introducción ? En 1980 por Michael E. Porter en su libro Competitive Strategy: Techniques for Analyzing Industries and Competitors. El punto de vista de Porter es que existen cinco fuerzas que determinan las consecuencias de rentabilidad a largo plazo de un mercado o de algún segmento de éste. Se basa en la idea de que la empresa debe evaluar sus objetivos y recursos frente a cinco fuerzas que rigen la competencia industrial ? ? Las 5 fuerzas 1.Amenaza de Los nuevos competidores 3.- poder de Negociación De los proveedores 2.- Rivalidad entre competidores 4.- poder de Negociación De los clientes 5.- Amenaza de Servicios y Productos Sustitutivos 1.- Amenaza nuevos competidores ? El mercado o el segmento no son atractivos dependiendo de si las barreras de entrada son fáciles o no de franquear por nuevos participantes, que puedan llegar con nuevos recursos y capacidades para apoderarse de una porción del mercado. 2.- La rivalidad entre los competidores. ? Para una corporación será más difícil competir en un mercado o en uno de sus segmentos donde los competidores estén muy bien posicionados, sean muy numerosos y los costos fijos sean altos, pues constantemente estará enfrentada a guerras de precios, campañas publicitarias......

Words: 1307 - Pages: 6

Summary What Is Strategy? by: Porter, Michael E.

...Michael Porter’s article describes the difference between operational efficiency and strategy by providing detail examples throughout the article. Porter explains how operational efficiency is key to any business but should not be the driver for business success. He outlines how strategy is the key to any business by creating a unique and valuable position within a market even though there could be trade-offs. Porter refers to operational efficiency as performing industry wide actions better then your competitors. He provided an example of when Japanese’s electronic manufactures where able to lower cost and still provide top notch quality in the 1980’s. These manufactures quickly realized they were unable secure key market real estate within Japan. They need to change their strategic position. He simply showed how operational efficiency is not the way to sustain business as once these activities are known in the industry all similar companies will replicate them. Porter refers to strategic position as performing industry wide actions in a complete different way. Porter uses Southwest Airlines and IKEA as companies who have used their strategic position to their fullest. Southwest airlines deliberately chose a different way to perform existing activities by using a Needs-Based source. Porter argues there are 3 key sources of strategic positioning and the only way to gain advantages; Variety-Base Positioning, Needs-Based Positioning, and Access-Based Positioning. These......

Words: 487 - Pages: 2

Who Is Michael Porter

...Who is Michael porter? Michael porter is the Bishop William Lawrence University Professor, based at Harvard Business School, this is one of the highest professional recognitions that can be awarded to a Harvard faculty member. He is considered the father of the modern strategy field and also as one of most influential thinker on management and competitiveness. He is one of the leading man in competitive strategy, the competitiveness and economic development of nations, states and regions, and the applications of competitive principles to social problems. He has written 18 books and more than 125 articles. He has a BSE, he got high honors in aerospace and mechanical engineering (1969) from Princeton University. Porter has an M.B.A (1971) and a PhD in Business Economics (1973) from Harvard. One of his biggest contributions to business are the five forces, which are: • The threat of the entry of new competitors. • The threat of substitute products or services • The bargaining power of costumers (buyers) • The bargaining power of suppliers • The intensity of competitive rivalry Michael Porter wrote the book Competitive Strategy, which has been translated into seventeen languages. This book changed the way that chief executive officers thought about their companies. He was appointed in 1985 to President Ronald Reagan’s Commission on Industrial Competitiveness, this helped him publish his next big book, The Competitive Advantage of Nations, in 1990. Porter still......

Words: 401 - Pages: 2


...Porter's Five Forces of Competitive Position Analysis were developed in 1979 by Michael E Porter of Harvard Business School as a simple framework for assessing and evaluating the competitive strength and position of a business organization. This theory is based on the concept that there are five forces that determine the competitive intensity and attractiveness of a market. Porter’s five forces help to identify where power lies in a business situation. This is useful both in understanding the strength of an organization’s current competitive position, and the strength of a position that an organization may look to move into. Strategic analysts often use Porter’s five forces to understand whether new products or services are potentially profitable. By understanding where power lies, the theory can also be used to identify areas of strength, to improve weaknesses and to avoid mistakes. Porter’s five forces of competitive position analysis: The five forces are: 1. Supplier power. An assessment of how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each essential input, uniqueness of their product or service, relative size and strength of the supplier, and cost of switching from one supplier to another. 2. Buyer power. An assessment of how easy it is for buyers to drive prices down. This is driven by the number of buyers in the market, importance of each individual buyer to the organization, and cost to the buyer of......

Words: 371 - Pages: 2


...competition. One way to answer those questions is by using Porter's Five Forces model. Originally developed by Harvard Business School's Michael E. Porter in 1979, the five forces model looks at five specific factors that help determine whether or not a business can be profitable, based on other businesses in the industry. "Understanding the competitive forces, and their underlying causes, reveals the roots of an industry's current profitability while providing a framework for anticipating and influencing competition (and profitability) over time," Porter wrote in a Harvard Business Review article. "A healthy industry structure should be as much a competitive concern to strategists as their company’s own position." According to Porter, the origin of profitability is identical regardless of industry. In that light, industry structure is what ultimately drives competition and profitability —not whether an industry produces a product or service, is emerging or mature, high-tech or low-tech, regulated or unregulated. "If the forces are intense, as they are in such industries as airlines, textiles, and hotels, almost no company earns attractive returns on investment," Porter wrote. "If the forces are benign, as they are in industries such as software, soft drinks, and toiletries, many companies are profitable." Understanding the Five Forces Porter regarded understanding both the competitive forces and the overall industry structure as crucial for effective strategic......

Words: 1362 - Pages: 6

A Summary of Michael Porter

...Since its introduction in 1979, Michael Porter’s Five Forces has become the de facto framework for industry analysis. The five forces measure the competitiveness of the market deriving its attractiveness. The analyst uses conclusions derived from the analysis to determine the company’s risk from in its industry (current or potential). The five forces are (1) Threat of New Entrants, (2) Threat of Substitute Products or Services, (3) Bargaining Power of Buyers, (4) Bargaining Power of Suppliers, (5) Competitive Rivalry Among Existing Firms. The following is a Five Forces analysis of The Coca-Cola Company in relationship to its Coca-Cola brand. Threat of New Entrants/Potential Competitors: Medium Pressure * Entry barriers are relatively low for the beverage industry: there is no consumer switching cost and zero capital requirement. There is an increasing amount of new brands appearing in the market with similar prices than Coke products * Coca-Cola is seen not only as a beverage but also as a brand. It has held a very significant market share for a long time and loyal customers are not very likely to try a new brand. Threat of Substitute Products: Medium to High pressure * There are many kinds of energy drink s/soda/juice products in the market. Coca-cola doesn’t really have an entirely unique flavor. In a blind taste test, people can’t tell the difference between Coca-Cola and Pepsi. The Bargaining Power of Buyers: Low pressure * The individual buyer no......

Words: 443 - Pages: 2

Michael Porter

...QUESTION: Choose an industry in which you would like to compete. Use the five forces method of analysis to explain why you find that industry attractive. Porter’s Five Forces Method Industry: Car service industry Introduction Michael Porter is a professor at Harvard Business School and is a leading authority on competitive strategy and international competitiveness. Five forces uses concepts developing, Industrial Organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the industry profitability. Five Forces Analysis assumes that there are five important forces that determine competitive power in a business situation. These are: 1. Supplier Power: Here you assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another, and so on. The fewer the supplier choices you have, and the more you need suppliers' help, the more powerful your suppliers are. In the car service industry, for company owned players the bargaining power of suppliers is less as it can get constant supply of spare parts including OEM parts (Vehicle manufacturer’s brand) and OES parts (reputed brands of component manufacturer’s either domestic or international, supplying to vehicle manufactures or aftermarket)....

Words: 1334 - Pages: 6

The Summary of "What Is Strategy" from Michael Porter

... What Is Strategy? (To make a summary of the article while answering the question, the answer directly related to the questions are highlighted ) 1. Achievements Neutrogena has established itself in the soap market through variety-based positioning. Michael. Porter defines strategic position as attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company. It means performing different activities from rivals, or performing similar activities in different ways. He maintains that strategic position emerges from three distinct but not mutually exclusive and often overlapped sources, ie: variety-based positioning, needs-based positioning and access based positioning. And variety-based positioning by which Neutrogena obtained competitive advantages over its rivals means serving few needs of many customers. 2.How did it make choice? Porter argues that operational effectiveness is not strategy. Operational effectiveness (OE) means performing similar activities better than rivals. Constant improvement in operational effectiveness is necessary to achieve superior profitability. However, it is not usually sufficient because of rapid diffusion of best practice. The similar programs such as TQM, outsourcing, benchmarking and time-based competition do move the productivity frontier forward, however raising the bar fro everyone. Hence such competition produces absolute improvement in......

Words: 1481 - Pages: 6

Competitive Advantage by Michael E Porter

...Competitive Advantage Creating and Sustaining Superior Performance Author: Michael E. Porter Michael E. Porter's Competitive Advantage explores the underpinnings of competitive advantage in the individual firm. Porter's groundbreaking concept of the value chain disaggregates a company into "activities," or the discrete functions or processes that represent the elemental building blocks of competitive advantage. Giving readers a comprehensive understanding of business strategy and how to create a sustainable competitive advantage for their organization, Porter explores how a firm can put the generic strategies of cost leadership, differentiation and focus into practice. This essay will explore Competitive Advantage and the underlining theory that to compete in any industry, companies must perform a wide array of discrete activities that are narrower than traditional functions. It will analyze the real core of the book which is to determine whether companies profit from creating value for customers, or whether that value is competed away.   INTRODUCTION “Competitive Advantage is at the heart of a firm’s performance in competitive markets. After several decades of vigorous expansion and prosperity, however, many firms lost sight of competitive advantage in their scramble for growth and pursuit of diversification. Today the importance of competitive advantage could hardly be greater. Firms throughout the world face slower growth as well as domestic......

Words: 3639 - Pages: 15


...PORTER’S FIVE FORCES MODEL Porter identified five competitive forces that shape every single industry and market. These forces help us to analyze everything from the intensity of competition to the profitability and attractiveness of an industry. It has become a frequently used tool for analyzing a company's industry structure and its corporate strategy. Factors associated with industry structure have been found to play a dominant role in the performance of many companies, with the exception of those that are its notable leaders or failures. As such, one needs to understand these factors at the outset before delving into the characteristics of a specific firm. Michael Porter, a leading authority on industry analysis, proposed a systematic means of analyzing the potential profitability of firms in an industry known as Porter’s “five forces” model. According to Porter, an industry’s overall profitability, which is the combined profits of all competitors, depends on five basic competitive forces. • Intensity of rivalry among incumbent firms • Threat of new competitors entering the industry • Threat of substitute products or services • Bargaining power of buyers • Bargaining power of suppliers Figure here shows the relationship between the different competitive forces. THREAT OF NEW ENTRANTS The easier it is for new companies to enter the industry, the more cutthroat competition there will be. Factors that can limit the threat of new......

Words: 1017 - Pages: 5

مواضيع مثبتة | TV Movie | saison 8, épisode 11 - Pour quelques bretzels de plus