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Summary Article: Michael Eugene Porter Leading authority on competitive strategy
from QFinance: The Ultimate Resource
LIFE AND CAREER

Michael Porter is a university professor at Harvard Business School, and an influential thinker on management strategy and economics. His ideas on strategy have become the basis for the required strategy course at the Harvard Business School, and his work is taught in virtually every business school around the world. He also created and chairs Harvard’s program for newly appointed CEOs, and he is a leading authority on the competitiveness and economic development of nations, states, and regions. He is the cofounder of the Monitor Group, and has acted as a consultant to businesses, and governments. He is a Fellow Member of the Strategic Management Society. He has played an active role in US economic policy with the Executive Branch, Congress, and international organizations, and is a founding member of the Executive Committee of the Council on Competitiveness. He also chairs the selection committee for the annual Corporate Stewardship Award of the US Secretary of Commerce, and the Global Competitiveness Report.

KEY THINKING
  • Michael Porter is at the forefront of advances in research on competitive advantage, by focusing on how a company, region, or country can successfully develop a winning competitive strategy.

  • He has shown how this can be achieved through an improvement in organizational innovation, and through factor conditions, demand conditions, related and supporting industries, and company strategy, structure, and rivalry.

  • He originated and popularized the concept of the value chain, where products pas through all activities of the chain in order, and increase in value at each activity.

  • In The Competitive Advantage of Nations, he identifies the fundamental determinants of national competitive advantage in an industry, shows how they work together as a system, and examines “clustering,” in which groups of successful firms and industries emerge in one country to gain leading positions in the world market.

  • He originated the “Porter hypothesis,” which argues that environmental progress and economic competitiveness are more complementary than previously thought.

IN PERSPECTIVE
  • Porter’s theories on business clusters, and their impact on economic development, have resulted in many cluster initiatives around the world.

  • He has explained how, to ensure competitiveness, an organization must choose between three generic strategies: cost leadership, differentiation, and focus.

  • These strategies are driven by five competitive forces: the bargaining power of customers, the bargaining power of suppliers, the threat of similar products being brought to market, the threat of new market entrants, and the level of existing competition.

  • He focuses on both primary and secondary business activity, with the former being concerned with turning raw materials into products, and the latter relating to activities that support the primary, such as procurement, technology development, human resources, and company infrastructure.

  • He produced three critical tests for success: attractiveness, cost-of-entry, and the better-off test, and has introduced seven steps to tackle these questions.

  • In a number of articles, he has introduced a new framework for developing strategy in foundations and other philanthropic organizations, and examined how corporations should think strategically about their social responsibility.

  • In his latest book, Redefining Health Care, he examines competition in the health care system, and looks at ways of improving health care delivery.

“National and economic prosperity is created, not inherited.”

Michael Eugene Porter
Copyright © Bloomsbury Information Ltd, 2009, 2011, 2012, 2013, 2014

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