STRATEGY !!!

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MICHAEL

E.

PORTER

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LIFE : MICHAEL PORTER

Born: May 23, 1947,

BSE : Mechanical and Aero Engineering, Princeton

MBA : Harvard Business School (1971)

George F Baker Scholar

PhD : Business Economics , Harvard University (1973)

Bishop William Lawrence University Professor

Institute for Strategy and Competitiveness

Fellow Member of the Strategic Management Society

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18 Honorary Doctorates

Six time winner of McKinsey Award : Best HBR article of the year

Irwin Outstanding Educator Award - Academy of Management

Adam Smith Award : Distinguished Contribution in the Field of

Management

Fellow of Royal Society of Edinburgh

John Kenneth Galbraith Medal - American Agricultural Economics

Association

Academy of Management Career Achievement Award -Distinguished Scholarly Contributions to Management

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AWARDS : MICHAEL PORTER

Intellectual Leader in Modern Competition and Strategy Objective Focus: How Firms and Nations can build

Competitive Advantage and Strategy Redefined Thinking about:

Competitiveness Economic development Economically distressed urban communities Environment policy Role of Corporations in Society

18 Books and 125 articlesCompetitive StrategyCompetitive Advantage of NationsOn competition

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MICHAEL PORTER: CONTRIBUTIONS

Competitive Advantage: Lower Cost or Differentiated

Porter’s Five Forces: Profitability and Attractiveness

Strategic Groups: Grouping Companies with similar Business Model or Strategy

Value Chain: Organizational Activities

Market Positioning: Variety, Need and Access Based

Porter’s Clusters: Regional Economic Development

Diamond Model: Nations are Competitive

Porter’s Four Corners Model: Predictive tool for a Competitor’s course of Action.

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MICHAEL PORTER: STRATEGIC SYSTEM

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STRATEGY : HOW AN ORGANIZATION IS GOING TO WIN

COMPETING TO BE THE BEST

COMPETING TO BE UNIQUE

The worst error in strategy is to compete with rivals on the same dimensions.

• Strategy is different that aspirations– Our strategy is to be #1 or #2

– Our strategy is to grow

• Strategy is more than a particular Action– Our strategy is to merge.

– Internationalize

• Strategy is not Vision/Values– Our strategy is to meet the aspiration of customer

– Serve community

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WHAT IS MEANT BY STRATEGY?

Strategy defines the company’s distinctive approach to competing and the competitive advantage on which it will be

based.

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ECONOMIC FOUNDATIONS OF STRATEGY

INDUSTRY STRUCTURE

STRATEGIC POSITIONING WITHIN

THE INDUSTRY

STRATEGIC THINKING MUST ENCOMPASS BOTH THE AREAS. COMPANIES MUST ALSO FOCUS ON THE HEALTH OF THE INDUSTRY,

AND NOT JUST ON THEIR OWN POSITION.

Intra-

Industry RivalryStrategic Business

Unit

How strong is the rivalry among existing

players? Does only one player dominate?

Bargaining

Power of the

Buyers

How strong is the position

of the buyers? Can we sell

in large volumes? Do we

need to discount heavily?

How easy or hard it is for new entrants to start and compete? Any barriers to their

entry?Potential New Entrants

How easy or hard it is for

a new product or service to replace what already exists?

Substitute Products

and Services

Bargaining

Power of Suppliers

How strong is the position of the

suppliers? Are there many? Few?

Monopoly?

PORTER’S FIVE FORCES…

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WHAT CREATES A SUCCESSFUL STRATEGY?

FIRST STEP: A UNIQUE VALUE PROPOSITION OR DIFFERENTIATOR3 QUESTIONS

•What customers are you going to serve?•What needs will be met?

•What price will be charged?

SECOND STEP: DISCTINCTIVE VALUE CHAINValue chain is a framework to see the firm as a chain of activities.

Value chain has to be uniquely good to achieve unique distinction.

THIRD STEP: TRADEOFFMaking a clear tradeoff and choosing what to do and what not to do.

“Willingness to make consumers unhappy”

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SOUND STRATEGIC THINKING

COMPANIES HAVE TO SAY NO.NOT NECESSARY FOR WHOLE TEAM TO AGREE ON

STRATEGY.STRATEGY IS NOT ABOUT CONSENSUS, ITS ABOUT MAKING

CRYSTAL CLEAR CHOICESDO NOT TOLERATE DOUBTERS

CLARITY ABOUT WHAT WE ARE GOING TO DO, AND WHAT WE ARE NOT GOING TO DO

LESS THAN HALF THE COMPANIES HAVE A CLEAR STRATEGY.

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“The underlying principles of strategy are enduring, regardless of technology or the pace of change.”

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THANK YOU

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VALUE CHAIN