Michael Porter

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Michael Porter
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Education and Career

• B.S.E. Aerospace and Mechanical Engineering
  Princeton 1969
• M.B.A Harvard 1971
• Ph.D. Business Economics Harvard 1973
• Bishop William Lawrence University Professor,
  based at Harvard Business School

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Environmental Forces1980

• Decline in demand
• High interest rates
• High inflation
• Deregulation by the government

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Porters Five Competitive Forces

1. Threat of Entry
2. Threat of Substitution
3. Bargaining Power of Buyers
4. Bargaining Power of Suppliers
5. Rivalry Among Current Competitors

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Threat of Entry

• Depends on two things
• 1. Barriers to entry
• Economies of Scale
• Product Differentiation
• Capital Requirements
• Switching Costs
• Access to Distribution Channels
• Government Policies

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Threat of Entry

• 2. Expected Retaliation
• History of retaliation
• Established firms
• Slow industry growth

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Pressure from Substitute Products

• Create a ceiling on price
• Identify them by searching for other products
  that can perform the same function in the market
• Requires good analysis

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• Bargaining Power of Buyers
• Force prices to go down
• Play competitors against each other
• Bargaining Power of Suppliers
• Threaten to raise prices
• Threaten to reduce quality
• Powerful suppliers can squeeze profitability out
  of an industry

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Rivalry Among Current Competitors

• Jockeying for position
• Pattern of action and reaction
• Price competition
• Advertising battles
• Product Introductions

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Create a Defendable Position

1. Positioning
2. Influence the Balance
3. Exploit Change

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Impact on Management

• Author of 16 books and 75 articles
• Competitive Strategy
• What is Strategy?
• Defined our understanding of competition and
  competitive strategy
• Influence

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Recent Works

• Clusters
• Geographic concentrations of interconnected
  companies
• Compete but also cooperate
• Silicon Valley
• Hollywood
• Role of location in competitive advantage

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More Recent Works

• Innovation Index
• Innovative activity vital to a nations growth
• Innovation Index-measure a nations innovation

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Criticisms

• Innovation
• Methodology is based on patents filed in US
• Not all innovations relate to patents
• Judge a whole nations innovation
• Parts may be better or worse

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• Not afraid to take a point of view and to present
  it before he has fully developed his argument
• The Prophet
• Unfounded claims

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• Internet Strategy
• Remained silent until now
• Created retrospective summations

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Strategy and the Internet

• More important than ever to use strategy
• Internet tends to weaken industry profitability
• Shift basis of competition away from
  differentiation, and toward price
• Rushing into misguided partnerships

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• See the Internet for what it is
• Enabling Technology
• Set of Tools
• Can be used wisely or unwisely
• As part of a strategy

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• In the end, companies cant just jump without
  thinking into an internet strategy.
• They still must create value and get paid for
  it.