BOOK REVIEW

“COMPETITIVE STRATEGY”
MICHAEL PORTER

Group 3
 Contents
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1. Porter’s recommendation to Organization

A. Broad Strategies
B. Generic Industry Environment and Strategies
C. Strategies for three crucial decision

2. School of Strategy

3. Critique of Porter’s recommendation

 1. Porter’s recommendation to Organization
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 PART A
 Three broad strategies:
1. Cost Leadership
– E.g. Wal-Mart (Retailing), Southwest Airlines (Airlines
Industry)

2. Differentiation
– E.g. Apple (Electronics), Mercedes-Benz (Automobile)

3. Focus
– E.g. Rolls Royce (Automobile), Nike (Sports Material)
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 However, there can be many facets to these broad

strategies
 “Strategic Groups”
 “Mobility Barrier”
 Analysis of Competitors
 Future Goals
 Assumptions
 Current Strategy
 Capabilities
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 He disagrees with concept of Industry Life cycle

having only four stages

 One or more factors affect the life cycle

E.g. long run changes in growth,
buyer’s learnings,
product; marketing or process innovation
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 PART B
 A. Fragmented Industry
1. Overcome fragmentation
2. Coping with fragmentation

E.g. Professional Jawed Habib, Reliance Fresh and More.

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 B. Emerging Industry:
 Strategic Choice:
1. Shaping Industry structure
2. Coping with externalities in Industry Development
3. Changing role of suppliers and channels
4. Shifting mobility barriers

 E.g. Reliance entry into telecommunication

industry
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 C. Transition to Industry Maturity

1. Sophisticated cost analysis
2. Process innovation and design for manufacture
3. Increasing scope for purchase
4. Buy cheap assets
5. Buyer selection
6. Different cost curves
7. Competing internationally

 E.g. Harley Davidson exploring other markets, Books

publishing firms – Selling E-book
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 D. Declining Industry

E.g. JTC Corp. of Union

(Ref:http://www.turnaround.org/Publications/Articles.aspx?objectID=1133)
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 E. Global Industry
 Strategic choice:
1. Broad line global competition
2. Global focus
3. National focus
4. Protected niche

 E.g. McDonald, Dell, Samsung, Nestle

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 PART C:
1. Vertical Integration
 Full Integration:
 Strategic benefits like
1. Economies of combined operation
2. Economies of internal control and coordination
3. Economies of information
 Strategic Costs like
1. Cost of overcoming mobility barriers
2. Increased operating leverage
3. Higher overall exit barrier
4. Capital investment requirement

 Tapered Integration
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 2. Capacity Expansion:
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 3. Entry into Business

 Entry trough internal development
 Entry through acquisition
 E.g. Reliance entered into Hospitality industry by acquiring
14% majority stake in EIH
 Sequenced Entry
 Entering into one strategic group and then exploring other
strategic groups within the industry
 E.g. Coke acquired brand Thums up in India and then made
its presence nationwide including it into company portfolio
for India.
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 The Positioning School
1. Positioning the company- Positioning the company so that its
capabilities provide the best defense against the competitive
force.
2. Influencing the balance- Influencing the balance of the forces
through strategic moves, thereby improving the company's
position.
3. Exploiting industry change- Anticipating shifts in the factors
underlying the forces and responding to them, with the hope
of exploiting change by choosing a strategy appropriate for
the new competitive balance before opponents recognize it.
 2. School of Strategy
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 Thus, the key to growth and even survival is to stake out a

position that is
 less vulnerable to attack from head-to-head opponents,
whether established or new, and
 less vulnerable to erosion from the direction of buyers,
suppliers, and substitute goods
 With the knowledge about intensity and power of
competitive forces, organizations can develop options to
influence them in a way that improves their own
competitive position. The result could be a new strategic
direction, e.g. a new positioning, differentiation for
competitive products of strategic partnerships.
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o In the economic sense, the model assumes a classic

perfect market.
o The model assumes relatively static market structures.
This is hardly the case in today’s dynamic markets.
o The Five Forces model may have some use for later
analysis of the new situation; but it will hardly provide
much meaningful advice for preventive actions.
o It assumes that companies try to achieve competitive
advantages over other players in the markets as well as
over suppliers or customers; does not considers
strategic alliances, etc.
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 It assumes that future conditions will be stable enough to

draw conclusions about which conditions will be
favourable, without giving enough guidance on how to deal
with the increasing frequencies and degrees of volatility in
financial markets, commodity prices, changing customer
preferences, etc.
 According to most references, the sixth force is government
or the public (helping to explain the reasoning behind
strategic alliances).
 Contrary to Porter’s views, differentiation strategies are
more profitable than cost leadership strategies, because
market share leaders prefer to compete more on the basis of
differentiation than low cost
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Thank You