Michael Porter Essay

4561 words - 18 pages

OverviewMichael Porter is a well known strategy guru. He is Harvard University's youngest tenured professor. Every strategy student can recite his 'Five Forces' model of competitiveness.Porter built his reputation mainly by writing on strategy. All strategy students have to study Porter as a basic course requirement. His books include 'Competitive Strategy: Techniques for Analysing Industries and Competitors (1980); 'Competitive Advantage: Creating and Sustaining superior Performance' (1985); 'Competitive Advantage of Nations' (1990); and numerous articles in the Harvard Business Review. His books adorn the shelves of Chief Executives, politicians, academics and business management students. He has been commissioned by the DTI and the Economic and Social Research Council to address the productivity gap as far as UK is concerned.He has been appointed to a University Professorship, the highest professional distinction for a Harvard faculty member.As a strategy guru he is included in this book because of his contribution on how firms compete and gain competitive advantage. Competition is a key aspect of marketing. According to Harvard University Gazette, his book 'Competitive Strategy: Techniques for Analysing Industries and Competitors' is considered the pioneering treatise on corporate competition and strategy.What does 'The Witch Doctors',[23] say about Michael Porter?'Porter's work does not lend itself to one-line summaries, yet, underneath all his lists and copious examples, there is arguably a fairly simple message. The essence of strategy is really about making a choice between two different ways of competing. One choice is market differentiation, competing on the basis of value added to customers, so that people will pay a premium to cover higher costs. The other choice is cost-based leadership, offering products or services at the lowest cost. Though quality and service is never irrelevant, reducing cost is the major focus of the second sort of organisation; and vice versa for the first. Porter's data showed that firms with a clear strategy performed better than those that either lacked a clear strategy or that consciously tried to follow both paths(i.e. lead the way in price and quality).'Porter's Five Forces and marketingEvery student of strategy and marketing strategy should be conversant with Porter's five forces. In order to construct a competitive strategy, an organisation needs to know what is likely to happen in the markets in which the organisation delivers its products and services. It also has to know who its competitors are in a particular industry structure.Porter's Five ForcesIn any industry the rules of the competition are governed by five competitive forces. These are:1.potential entrants,2.competitive rivalry,3.substitutes,4.the bargaining power of buyers,5.the bargaining power of suppliers.These five forces address the question 'why are some markets more attractive than others?' The collective strength of these five...

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