Michael Porter on Strategy and Competitive Advantage

1. STRATEGY !!!
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2. MICHAEL
E.
PORTER
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3. 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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4. AWARDS : MICHAEL PORTER
 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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5. MICHAEL PORTER: CONTRIBUTIONS
 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 articles
Competitive Strategy
Competitive Advantage of Nations
On competition
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6. MICHAEL PORTER: STRATEGIC SYSTEM
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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7. 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.
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8. WHAT IS MEANT BY STRATEGY?
• 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
Strategy defines the company’s distinctive approach to
competing and the competitive advantage on which it will be
based.
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9. 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.
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10. PORTER’S FIVE FORCES…
How strong is the rivalry among existing
players? Does only one player dominate?
How easy or hard it is for new entrants to
start and compete? Any barriers to their
Intra-
Industry Rivalry
Strategic Business
Unit
entry?
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?
Potential New Entrants
How easy or hard it is for
Substitute Products
and Services
a new product or service to replace what already exists?
Bargaining
Power of Suppliers
How strong is the position of the
suppliers? Are there many? Few?
Monopoly?

11. WHAT CREATES A SUCCESSFUL STRATEGY?
FIRST STEP: A UNIQUE VALUE PROPOSITION OR DIFFERENTIATOR
3 QUESTIONS
•What customers are you going to serve?
•What needs will be met?
•What price will be charged?
SECOND STEP: DISCTINCTIVE VALUE CHAIN
Value 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: TRADEOFF
Making a clear tradeoff and choosing what to do and what not to do.
“Willingness to make consumers unhappy”
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12. 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 CHOICES
DO 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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13. “The underlying principles of strategy are enduring,
regardless of technology or the pace of change.”
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14. THANK YOU
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15. VALUE CHAIN
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