Michael E. Porter and the Notion of Strategy

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The Competitive Advantage of Nations by Michael E. Porter The book introduces Porter's "diamond," a whole new way to understand the competitive position of a nation (or other locations) in global competition that is now an integral part of international business thinking. Porter's concept of "clusters," or groups of interconnected firms, suppliers, related industries, and institutions that arise in particular locations, has become a new way for companies and governments to think about economies, assess the competitive advantage of locations, and set public policy. More information and prices from: Amazon.com - US dollars SeekBooks.com.au - Australian Dollars Amazon.ca - Canadian dollars Amazon.co.uk - British pounds (different cover) Amazon.de - Euros (different cover) Amazon.fr - Euros (different cover)

The Competitive Advantage of Nations

Michael E. Porter and the Notion of Strategy

Michael E. Porter is the world's most influential business thinker, according to an Accenture study conducted in 2002. His book, Competitive Strategy: Techniques for Analyzing Industries and Competitors (Free Press, 1980) has been required reading on numerous Business Strategy courses ever since it was published over two decades ago. His notion of strategy has been debated and criticized in academic circles but Porter's ideas have often been adopted uncritically (and, perhaps, misunderstood) by business leaders throughout the world (Hammond, 2001). According to Harfield (1998): "The question, what is strategic management?, often leads to the work of Porter. Strategic management texts inevitably contain his models, theories and frameworks which imply that they are ‘fundamental’ to the field. An historical journey through six prominent management\organization journals, Strategic Management Journal, Academy of Management Journal, Academy of Management Review, Journal of Management Studies, Organization Studies, Advances in Strategic Management, shows that Michael E Porter was not a constant contributor, in fact he is almost absent from the journals, but his work is often the study of empirical testing or theoretical debate ..." In fact, Harfield argues that 'strategic management' is a myth with Michael E. Porter as its principal myth-maker. Porter spent most of the 1990's concentrating on the competitive advantage of nations. Recently he has returned to look at corporate strategy and comments: "It's been a bad decade for strategy. Companies have bought into an extraordinary number of flawed or simplistic ideas about competition -- what I call "intellectual potholes." As a result, many have abandoned strategy almost completely. Executives won't say that, of course. They say, "We have a strategy." But typically, their "strategy" is to produce the highest-quality products at the lowest cost or to consolidate their industry. They're just trying to improve on best practices. That's not a strategy." (Hammond, 2001). He argues that this course has been adopted for three main reasons: 1. That people simply found strategy too difficult in the 1970s and 1980s - they had problems with it and it seemed artificial. 2. They were distracted by the pre-eminence of Japanese production techniques. This seemed to be about implementation rather than strategy: produce higher quality products at lower prices than your rivals and keep refining the process of production continuously. 3. More recently it was believed by many that change was happening too quickly for strategies to be of any value. Strategy was seen as rigid and inflexible in a world of speed and dynamic reinvention. Porter argues that strategy and operational effectiveness need to be distinguished from each other: "There's a fundamental distinction between strategy and operational effectiveness. Strategy is about making choices, trade-offs; it's about deliberately choosing to be different. Operational effectiveness is about things that you really shouldn't have to make choices on; it's about what's good for everybody and about what every business should be doing." (Hammond, 2001). He contends that business leaders have concentrated too much on operational effectiveness rather than strategy. He points to the popular managerial enthusiasms of the late-twentieth century - total quality, just-in-time, business process re-engineeering - as examples of this. In his view, they were driven by the incredible competitiveness of the Japanese upto the 1990s when some companies 'turned the nitty-gritty into an art form'. What is strategy? Strategic HRM Strategy Articles and Books References: Hammond, K.H. (2001) 'Michael Porter's Big Ideas', Fast Company, 44, p 150, March 2001. Harfield, T. (1998) 'Strategic Management and Michael Porter: a postmodern reading' Electronic Journal of Radical Organizational Theory, Vol IV Number 1 - August 1998.

Michael E. Porter is the world's most influential business thinker, according to an Accenture study conducted in 2002. His book, Competitive Strategy: Techniques for Analyzing Industries and Competitors (Free Press, 1980) has been required reading on numerous Business Strategy courses ever since it was published over two decades ago. His notion of strategy has been debated and criticized in academic circles but Porter's ideas have often been adopted uncritically (and, perhaps, misunderstood) by business leaders throughout the world (Hammond, 2001).

According to Harfield (1998): "The question, what is strategic management?, often leads to the work of Porter. Strategic management texts inevitably contain his models, theories and frameworks which imply that they are ‘fundamental’ to the field. An historical journey through six prominent management\organization journals, Strategic Management Journal, Academy of Management Journal, Academy of Management Review, Journal of Management Studies, Organization Studies, Advances in Strategic Management, shows that Michael E Porter was not a constant contributor, in fact he is almost absent from the journals, but his work is often the study of empirical testing or theoretical debate ..."

In fact, Harfield argues that 'strategic management' is a myth with Michael E. Porter as its principal myth-maker.

Porter spent most of the 1990's concentrating on the competitive advantage of nations. Recently he has returned to look at corporate strategy and comments:

"It's been a bad decade for strategy. Companies have bought into an extraordinary number of flawed or simplistic ideas about competition -- what I call "intellectual potholes." As a result, many have abandoned strategy almost completely. Executives won't say that, of course. They say, "We have a strategy." But typically, their "strategy" is to produce the highest-quality products at the lowest cost or to consolidate their industry. They're just trying to improve on best practices. That's not a strategy." (Hammond, 2001).

He argues that this course has been adopted for three main reasons:

1. That people simply found strategy too difficult in the 1970s and 1980s - they had problems with it and it seemed artificial.

2. They were distracted by the pre-eminence of Japanese production techniques. This seemed to be about implementation rather than strategy: produce higher quality products at lower prices than your rivals and keep refining the process of production continuously.

3. More recently it was believed by many that change was happening too quickly for strategies to be of any value. Strategy was seen as rigid and inflexible in a world of speed and dynamic reinvention.

Porter argues that strategy and operational effectiveness need to be distinguished from each other:

"There's a fundamental distinction between strategy and operational effectiveness. Strategy is about making choices, trade-offs; it's about deliberately choosing to be different. Operational effectiveness is about things that you really shouldn't have to make choices on; it's about what's good for everybody and about what every business should be doing." (Hammond, 2001).

He contends that business leaders have concentrated too much on operational effectiveness rather than strategy. He points to the popular managerial enthusiasms of the late-twentieth century - total quality, just-in-time, business process re-engineeering - as examples of this. In his view, they were driven by the incredible competitiveness of the Japanese upto the 1990s when some companies 'turned the nitty-gritty into an art form'.

What is strategy?
Strategic HRM
Strategy Articles and Books

References:

Hammond, K.H. (2001) 'Michael Porter's Big Ideas', Fast Company, 44, p 150, March 2001.

Harfield, T. (1998) 'Strategic Management and Michael Porter: a postmodern reading' Electronic Journal of Radical Organizational Theory, Vol IV Number 1 - August 1998.

Competitive Strategy: Techniques for Analyzing Industries and Competitors

The Competitive Advantage: Creating and Sustaining Superior Performance

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