MANAGEMENT SCHOLAR

MICHAEL PORTER

INTRODUCTION OF
MICHAEL PORTER
Michael Porter also known as Michael Eugene Porter was born on May 23,
1947
Degree with high honors in aerospace and mechanical engineering from
Princeton University in 1969
Received Master in Business Administration with excellent award from
Harvard Business School I 1971
Ph.D. in Business Economics from Harvard University in 1973
Popularly known as the Father of Modern Strategy field and recognized
worldwide for his take on competition and company strategy

ACHIEVEMENT OF
MICHAEL PORTER
Bishop William Lawrence University Professor based at Harvard Business
School
Founders of The Monitor Group consulting firm, but now is what we called
Deloitte
Author of 17 books and over 125 articles, is a leading authority on
competitive strategy and the competitiveness and economic
development of nations, states, and regions
Received special award with high honors in aerospace and mechanical
engineering from Princeton University in 1969

CONT.
Being as Chief Executive Officer Workshop was held twice each year,
focusing on the challenges faced by the new CEO of the assume
leadership, setting their agenda, and address issues such as strategy,
board governance, communication, and set the time and values.
His book, Competitive Strategy on Techniques Analyzing Industries and its
competitors, is the first book-length publication on strategy. This book is
the 63rd printing and has been translated into 19 languages
During the year 2004, while Michael Porter has focused on rural
development, which he published a study conducted by the economic
development Administration to rural development

HISTORY OF
MANAGEMENT THEORY
Studying history of management is a way to achieve strategic thinking,
see the big picture and improve conceptual skills
This first theory has been recorded is classical perspective which is the
practice of management 3000 bc was developed by the Sumerians and
Egyptians that emphasize a rational, scientific approach to the study of
management and sought to make organization efficient operating
machines
Michael Porter introduce a new theory which is use until now by
management. Porter's Five Forces of Competitive Position Analysis were
developed in 1979

CONT.
Simple framework for assessing and evaluating the competitive strength
and position of a business organization
Based on the concept that there are five forces that determine the
competitive intensity and attractiveness of a market
Help to identify where power lies in a business situation
This is useful both in understanding the strength of an organizations
current competitive position, and the strength of a position that an
organization may look to move into
Five forces analysis helps organizations to understand the factors
affecting profitability in a specific industry, and can help to inform
decisions relating to whether to enter a specific industry or to increase
capacity in a specific industry and developing competitive strategies

CONT.
Analysis is a model that helps to explain why different industries can
maintain different levels of profitability
Porter identified five forces denied any role in forming and industrial
markets in the world
Powers often used to measure the intensity of competition, attractiveness
and profitability of the industry or market
The importance of this power is the number of competitors and their
ability to threaten the company

THE APPLICATION OF PORTERS

FIVE FORCES IN IKEA
IKEA Brief Background
A global furniture retailer
Provide modern architectural design for various appliances and furnitures
Established in more than 40 countries

Industry
Rivalry
Threat of New
Entrants
Threat of
Subtitutes

Compete in China and Japan

Offers lower prices with high quality DIY furniture

Low
High amount of capital investment
Equipped with skilled labors
Low
IKEA DIY-furniture
Quality and prices

Bargaining
Power of
Suppliers

Weak
Maintain close relationship with
suppliers
Wide range of suppliers all over the
world

Bargaining
Power of
Buyers

Strong
Wide range of alternative options
offered

CONTRIBUTION OF
MICHAEL PORTER
1. Shape companys strategies
. Positioning company by determining weakest forces
. Exploitation of changes in forces
. Reshaping forces in their favor
2. Shape Competition
. Because of threat of new entrance. So, must create barrier for entry by
a) Economic of scaling
b) Customer switching cost
c) Restrictive government policies
d) Unequal accesss to distribution channel.

CONT.
3. Evaluate market attractiveness
. By analysing 5 forces, company can state their industrys profitability &
attractiveness.
. Provides the opportunity to examine and evaluate complex interactions of
competitors.

CRITICISM OF MANAGEMENT THEORY

4) Missing attention for
Digitalization, Globalization, and
Deregulation.
The 3 factors are the reasons of why the structure
of industry changed over the past decade and these
factors are absent in Porters Theory.
1) No justification

2) Only generates
snap-shots.
It is static and does not
take account of time and
difficult to identify
markets with increased
competition dynamic due
to they can change very
rapidly.

CRITICISM OF
PORTERS THEORY

3) Not guarantee a competitive

advantage that is inviolable and
sustained.
It is static model and not include the environmental
changes over time.

It has no justification for the

choice of the 5 environmental
forces, which can prove the
validity of his choice.

PORTERS DIAMOND
Determinants of National Competitive Advantage: Porters Diamond

PORTERS DIAMOND OF
COMPETITIVE ADVANTAGE
Michael Porter tried to explain why a nation achieves international
success in a particular industry and identified four attributes that
promote or impede the creation of competitive advantage:
1. Factor endowments - a nations position in factors of production
necessary to compete in a given industry.
can lead to competitive advantage
can be either basic (natural resources, climate, location) or advanced (skilled
labor, infrastructure, technological know-how)
Ex; Choice of tile to meet customers demand.

2. Demand conditions - the nature of home demand for the

industrys product or service
influences the development of capabilities
Demanding customers pressure firms to be competitive
Ex; Local demand on cellular phones in Scandinavia made Nokia and
Ericsson to invest in other developing countries.

PORTERS DIAMOND OF
COMPETITIVE ADVANTAGE
3. Relating and supporting industries - the presence or
absence of supplier industries and related industries that are
internationally competitive

successful industries tend to be grouped in clusters in countries

Ex;
The enamel production unit was available.
The glazes production unit was also favorable.
These two were the main composition of producing tiles.
This reduces the transportation costs.

PORTERS DIAMOND OF
COMPETITIVE ADVANTAGE
3. Firm strategy, structure, and rivalry - the conditions
governing how companies are created, organized, and managed,
and the nature of domestic rivalry

vigorous domestic rivalry creates pressures to innovate, to improve

quality, to reduce costs, and to invest in upgrading advanced features
Ex;
Low entry barrier to market in the tile industry.
Rivalry became very intense.
Breakthroughs in both product and process technologies.

THANK YOU .