Michael Porter‘s antiquated, but-still-famous Five Forces of Competitive Position model provides a simple perspective for assessing and analyzing the competitive strength and position of a corporation or business organization. Your 50-year-old CEO and board have all read this book. If you want to converse with them, you should read up on it too.
Porter’s Five Forces:
- Existing competitive rivalry between suppliers
- Threat of new market entrants
- Bargaining power of buyers
- Power of suppliers
- Threat of substitute products (including technology change)
See: Five Forces Diagram
Porter’s five generic descriptions of industries:
- Fragmented (e.g. shoe repairs, gift shops)
- Emerging (e.g. space travel)
- Mature (e.g. automotive)
- Declining (e.g. solid fuels)
- Global (e.g. micro-processors)
Porter’s Diamond Model:
Porter is also particularly recognized for his competitive ‘diamond’ model, used for assessing relative competitive strength of nations, and by implication their industries:
- Factor Conditions: production factors required for a given industry, eg., skilled labour, logistics and infrastructure.
- Demand Conditions: extent and nature of demand within the nation concerned for the product or service.
- Related Industries: the existence, extent and international competitive strength of other industries in the nation concerned that support or assist the industry in question.
- Corporate Strategy, Structure and Rivalry: the conditions in the home market that affect how corporations are created, managed and grown; the idea being that firms that have to fight hard in their home market are more likely to be able to succeed in international markets.
SWOT Analysis Method:
The SWOT analysis is an extremely useful tool for decision-making, reviewing strategy, organizational positioning, or establishing direction in a company, or any other idea in business. SWOT is an acronym for Strengths, Weaknesses, Opportunities, Threats. Here’s more info about the origins and inventors of SWOT analysis. (SWOT Template)
Porter’s Value Chain:
Porter was gifted at simplifying and visualizing business processes. Here is an example of an extremely complex system of concepts simplified down into a single arr0w-shaped diagram. Basically, you need an MBA to understand how it can help your organization.
Michael Porter’s key books:
Competitive Strategy: Techniques for Analyzing Industries and Competitors, 1980
Competitive Advantage: Creating and Sustaining Superior Performance, 1985
Competition in Global Industries, 1986
The Competitive Advantage of Nations, 1990