Management Hall of Fame: Leading Management Gurus

Michael E. Porter
Father of Competitive Strategy (1947- Present)

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

Key Work

• Completes a degree in aeronautical engineering at Princeton University.
• Receives an Executive Education &  Ph.D. from Harvard Business School.
• Publishes Competitive Strategy, which sets him at leading edge of strategic thinking.
• Founds The initiative for a Competitive Inner City, and becomes C.E.O.

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:

1. Power of customers
2. Power of suppliers
3. Threat of similar products
4. Level of existing competition
5. Threat of new market entrants

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

1. The attractiveness test: High ROI , high entry barriers, low customers and suppliers bargaining power, and few substitute products.
2. 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
3. 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:

1. Factor conditions - The nation's infrastructure (including labor and skills)
2. Demand conditions - The nature of home market demand
3. Related and supporting industries - Presence or absence of supplier/feeder industries
4. Firm strategy, structure and rivalry - The national conditions under which companies are created, grow, organize, and manage.

Books & References:

• Competitive Strategy: Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press, 1980.
• CASES IN COMPETITIVE STRATEGY. New York: Free Press, 1983.
• Competitive Advantage: Creating and Sustaining Superior Performance. Rev. ed. New York: Free Press, 1985.
• Competition in Global Industries (Research Colloquium / Harvard Business School) (ed.). Boston, MA: Harvard Business School Press, 1986.
• The Competitive Advantage of Nations . Rev. ed. New York: Free Press, 1998.

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