Michael E. Porter - Competitive Strategy

“The purpose of the corporation must be redefined as creating shared value, not just profit per se. This will drive the next wave of innovation and productivity growth in the global economy.”

Michael E. Porter is a leading authority on competitive strategy, the competitiveness and economic development of nations, states, and regions, and the application of competitive principles to social problems such as the environment, health care delivery and corporate responsibility.

    "National and economic prosperity is created, not inherited." (Michael Porter)

After  Completing  a degree in aeronautical engineering at Princeton University. Went on to receives an Executive Education  &  Ph.D. from Harvard Business School.

According to Porter in order for organizations to compete they must choose between three generic strategies:

    Cost leadership - becoming the lowest cost producer in the market;

    Differentiation - offering something new, different, extra, or special features

    Focus - achieving dominance in a niche market.

These generic strategies are driven by five competitive forces that affect pricing, reduce margins and profits:

    Power of customers

    Power of suppliers

    Threat of similar products

    Level of existing competition

    Threat of new market entrants

Organizations can spread risk and attain growth by diversification and acquisition.  Porter prefers three critical tests for success:

    The attractiveness test: High ROI , high entry barriers, low customers and suppliers bargaining power, and few substitute products.

    The cost-of-entry test: If the cost of entry is so high that it prejudices the potential return on investment, profitability is eroded before the game has started.

   The better-off test: How will the acquisition provide advantage to either the acquirer or the acquired?

Porter identifies four attributes that affect nations and industries source of competitiveness:

    Factor conditions - The nation's infrastructure (including labor and skills)

    Demand conditions - The nature of home market demand

    Related and supporting industries - Presence or absence of supplier/feeder industries

    Firm strategy, structure and rivalry - The national conditions under which companies are created, grow, organize, and manage.

In 2000, Michael Porter was appointed a Harvard University Professor, the highest professional recognition that can be awarded to a Harvard faculty member.In 2009, he was awarded an honorary degree from McGill University.

 Professor Porter is generally recognized as the father of the modern strategy field, and has been identified in a variety of rankings and surveys as the world’s most influential thinker on management and competitiveness.