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Michael E. Porter is a professor at Harvard Business School and a leading authority on Strategy and Competitiveness. He did his MBA and Ph.D from Harvard. He has served as an advisor to several business and government organizations. He was also a founder of the strategy and management consulting firm, Monitor Group.
Professor Porter is best known for his landmark books that defined the field of Strategy - Competitive Strategy: Techniques for Analyzing Industries and Competitors (1980) and Competitive Advantage: Creating and Sustaining Superior Performance (1985). These books are must reads at the leading business schools.
I read Competitive Strategy (1980) for a Strategy course. It starts with a bang. On the very second page of the first chapter you will find the figure for the famous Five Forces Driving Industry Competition. While Porter did not intend this framework to be used for case interviews, in reality, this is a very important framework to know for the case interviews conducted by leading strategy and management consultancy firms. All top MBAs and anybody who has ever been hired by the best strategy and management consultancy firms knows this framework, and has probably read this book. The first chapter immediately proceeds to explaining each of the five forces:
1. Threat of new entrants
2. Intensity of rivalry among existing competitors
3. Pressure from substitute products
4. Bargaining power of buyers
5. Bargaining power of suppliers
While the first chapter alone is worth the cost of this book, I recommend it for the wisdom contained in the rest of the book. The chapters are organized under three parts (General Analytical Techniques, Generic Industry Environments, and Strategic Decisions). There are several thought provoking discussions on concepts such as A Framework for Competitor Analysis (Future goals, Assumptions, Current strategy, Capabilities), Market Signals and a Strategic Analysis of Vertical Integration.
This book is the single most important book on business strategy. It is a classic - like the management classics of Peter Drucker. As with every classic, the examples are old (not to be confused with outdated). But, the competition HP faced for electronic calculators in the 70s, it still faces for computers today. There have been several changes in the players, technology, industries, globalization, etc, but the foundation built by Porter's masterpieces are still relevant today.
Porter's second book Competitive Advantage (1985) introduced another important tool - The Value Chain. This analyzes primary activities (Inbound logistics, Operations, Outbound logistics, Marketing and Sales, Services) and support activities (Procurement, Technology development, Human resource management, Firm infrastructure) that firms must analyze to create value and competitive advantage.
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on December 30, 2000
Michael Porter is a Harvard Business School professor and a leading authority on competition and strategy. This book is a landmark in the field of strategy/strategic management, which later has become known as the positioning school. The book provides a great framework.
The book consists of three parts - General Analytical Techniques, Generic Industry Environments, and Strategic Decisions. In addition, the two appendices - Portfolio Techniques in Competitor Analysis, and How to Conduct an Industry Analysis - should also be mentioned as they are very useful.
In Part I, Porter discussess the structural analysis of industries (with the world-famous five forces), the three generic competitive strategies (overall cost leadership, focus, and differentiation), an excellent framework for competitor analysis, competitive moves, strategy toward buyers and suppliers, structural analysis within industries (strategic groups, strategic mapping, mobility barriers), and industry evolution (life cycle, evolutionary processes).
In Part II, Porter discusses competitive strategy within various generic industry environments, such as fragmented industries (with no real market leader), emerging industries (e-commerce and Internet are excellent examples, although not mentioned in this book as it was written in 1980), mature industries, declining industries, and global industries.
In Part III, Porter discusses strategic decisions which businesses/firms can take, such as vertical integration (forward, backward, partnerships), capacity expansion, and entry into new industries/businesses.
Even after 20 years, most of this book still stands strong, although some people will argue this. It is a MUST for MBA-students and all other people interested in strategy/strategic management. The book is good to read (simple US-English) and thus does not become a struggle.
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on October 20, 2003
This is one of the foundation books of the modern business education. Yes, it was written over twenty years ago and you cannot take a business course anywhere without the term "Porter's Five Forces" not at least being mentioned. But, really, this book is still completely relevant and should be on every businessperson's bookshelf, front and center.
For a concept that has so much a place in b-school discussions, you might think the book focuses on the 5-forces, but it is only a small part of the book. It outlines the Generic Competitive Strategies (again, a now well known topic), Competitor Analysis (extremely valuable), Market Signals, Competitive Moves, and so much more.
The book is in three parts, General Analytical Techniques, Generic Industry Environments, and Strategic Decisions. There is an appendix on Portfolio Techniques in Competitor Analysis, and a very useful appendix on How to Conduct an Industry Analysis.
I think a lot of times this book is not given as active a place in the pantheon as it deserves because so many books and articles are recycling a lot of what was in this book and most don't add much to the discussion. Honestly, this book is worth referring to over and over and over again. It is a tool or a weapon in your competitive war chest that needs to be kept active and in play.
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on February 14, 2003
Simply put, if you haven't read Competitive Strategy yet, you are unfit to talk about business strategy.
And only after reading it, are you fit to read the sequel, Competitive Advantage, which if you haven't read till now, makes you unfit to talk about business tactics.
These two books are the Old and New Testaments of business.
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on March 11, 2003
A must have. Porter provides students with a great place to start for understanding strategy. While you must know the basics in this book to understand the foundation of strategy,it will not provide you with a dynamic and cutting edge strategic framework that many of today's industries need.
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on November 20, 2002
As Adam Smith is to economics and capitalism, Porter is to business strategy within this market system.
This is THE seminal book for defining how businesses compete.
As technology fads and internet business models ("New economy") come and go, every company must still address the basics of competition as outlined within this book. The frameworks within the book outline:
-How to assess the competitive structure of your industry,
-Generic competitive strategies
-Competitor Analysis
-Effects of market signals on competitive behavior
-Competitive moves in response to your strategy
-Competitve strategy in a number of different market environments
-Impact of strategies such as Vertical integration, growth through new products, scale, and M&A
-... much more
You will use this book as a reference, and find it is timeless. It is no wonder the Mr. Porter is widely regarded as the preeminent strategist.
To put this in practice I recommend books on gaming theory.
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Anyone would agree that this book is the best overview of competitive strategy analysis ever written. The strength of the book is a solid outline of subjects and questions to improve your thinking, and get to be a step ahead of the competition. In highly-competitive, commodity businesses, that's usually what strategies focus on.
On the other hand, the rapid advances of knowledge and technology mean that the relevant benchmark is perfection, not the competitor, in defining an ideal best practice. In that world, this book has serious limitations, because the competitive dimension is often less important than the customer and user dimension these days.
Any business arena begins, as Peter Drucker so aptly put it, with the task "to create a customer." That reminder is especially relevant today when they are so many new ways to serve a customer's needs that no one has ever considered before. The strategic point of 'Blown to Bits' for example is that almost every business will see its vertical value chain (moving from resources through to the customer) broken apart into tiny segments each served by specialists. If you did not begin with that perspective in analyzing the impact of electronically-based business practices, you could easily focus on the wrong tasks using this book to create an over-broad strategy focus, rather than concentrating on just a few areas.
I suspect that the applications of Moore's Law and Metcalfe's Law need to be explicitly considered as part of the analysis that Professor Porter is recommending.
A more general weakness in this book is that it assumes that future conditions will be stable enough to draw conclusions about which conditions will be favorable, without giving enough guidance on how to deal with the increasing frequencies and degrees of volatility that we see (in areas like financial markets, commodity prices, the weather, changing customer preferences, and so forth).
Although no book that takes such a narrow focus can help but have weaknesses (like having the podiatrist not notice that you have kidney problems), if you want a good start of how to think about competitors, this is the book for you. Just be sure you keep developing yours strategy with additional dimensions after you finish using this analysis.
If you have read none of Professor Porter's works, this is the one book you should read.
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on January 15, 2001
When I started as a strategy consultant, Porter's Competitive Strategy and the classic five forces model within provided me with a first look at the process and mindset of the pure strategist. A weekend spent reading this book gave me the framework to intelligently analyze company strategy. I've made it required reading for all new employees.
If you are a business student (undergrad or MBA) and for some reason you have not read this, read it and assume everyone you interview with has read it. Use its basic principles in a case study interview and you'll pass with flying colors. Anyone in business of any sort should read this book and try applying it to your own business environment. Its pretty amazing how clear your business issues will appear.
Now for the negatives. It is very out of date, so do not use any of his observations on any of the industries mentioned. His case studies towards the end of the book are so irrelevant they are not worth reading, just skimming. Read his justifications carefully, since you may find yourself disagreeing with a significant percentage.
Despite its age, this is still the primer on strategy. Read this, and then read everything else.
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on September 30, 2000
I met Mr. Porter when I began to study strategic planning because each time I read a book I saw the label of Porter. Mr. Porter is a strong apostle of Positioning school, namely he believes that a firm must position itself in an industry by analyzing the structure of it. Today, Mr. Porter and his school is under fire and an intensive attack (You can look at books of Mintzberg and Stacey ! ). But I strongly beleive that Mr. Porter is a "Logic Man", not an "idealist". He loves material realities. Although today very popular strategic management perspectives are in fashion, the perspective of the Positioning School are here to stay. Please do not think one-sidedly about Competitive Strategy by only reading the opposites of it, instead read the original source. This book is still a very strong classic. Highly reccommended.
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on August 25, 1999
This is probably the most comprehensive book on the subject. However, there are a few areas where it's recommendations may not be entirely correct. For example, suppliers have been taken as one of the five competitive forces. After the success of several companies in becoming more competitive by building closer relations with their suppliers (e.g. in implementing JIT), is this still valid? For example, must companies increase the number of suppliers to reduce their power (when so many other companies have been able to reduce their costs by giving one supplier Economies of Scale)? Also, given that 'Quality is Free' (at least up to a point), are the strategies of 'Differentiation' and 'Cost Leadership' really mutually exclusive? Readers are advised to take some of the recommendations with a pinch of salt.
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