Book Review Competitive Strategy Techniques for Analysing Industries for Competitors - by Michael Porter Essay

About The Author Michael E. Porter is the C. Roland Christensen Professor of Business Administration at the Harvard Business School. He has received the Wells Prize in Economics, the Adam Smith Award, three McKinsey Awards and numerous other honours. Introduction This is an interesting book on Business strategies and a must read for everyone who is or aspires to hold a role of decision making in any business. The book centres around the strategies that a company should implement while struggling in the competitive market in the recent past and the time to come. The book is written in three sections. •General Analytical Techniques Generic Industry Environments •Strategic Decisions General Analytical Techniques is the first part of the book and it covers two topics main topics: 1. The five forces of competition. 2. Generic competitive strategies To further discuss the five forces of competition we would like to mention that the author here believes that the intensity of the competition is dependent on these mentioned five forces of economics. 1. The buying power of customers- The Competition is higher when the buying power of customers is high. This is usually the case when there are many substitutes or competitors to the product. 2.

The power of suppliers to squeeze profits- The power of suppliers to squeeze profits or bargaining power suppliers is high when their product enjoys a monopoly or has features or value adds that no other or very few other competitive products offer. Their bargaining power will also be high if the product is a necessity and cannot be substituted by other products easily. 3. The threat of new entrants coming into the industry- The competition is higher when the industry can easily attract new entrants. This happens when the capital requirement to start the business is not very high. 4. The threat of substitute products- The ompetition is high when the product can be easily substituted and has many substitutes available in the market. For eg. Tea is a substitute for coffee. 5. The rivalry between existing competitors- The book was able to offer a more sophisticated view of industry competition and brought some structure to accept challenge and outperform rivals Other topics covered in this first section of the book are: 1. Signalling to competitors. 2. Competitive moves. 3. Strategies towards buyers and suppliers. 4. Structural forces within industries which introduces the concept of strategic groups of competitors who have broadly similar strategies. . Industry evolution and movements through the product life cycle. Generic Industry Environments is the second part of the book, this section consists of 1. Fragmented industries – local suppliers, no competitor dominates. – The Book examines why industries stay fragmented and at the opportunities for a dynamic competitor to consolidate and acquire a critical competitive advantage. 2. Emerging industries – some new products are so innovative that they create new industries. Michael Porter explains the underlying forces which determine industry evolution as the new product becomes more established. 3.

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Industry maturity – after a new industry goes through a rapid growth stage, the industry matures which presents new challenges for management. 4. Declining industries – some industries are able to constantly renew themselves within the existing technology, but others find their technology and product offerings obsolete or only appealing to a small number of die-hards. This chapter looks at the issues of how you can decide whether you exit a declining industry early or stay around to reap any benefits. 5. Global industries – This chapter looks at the factors which determine why some industries do become global.

Strategic Decisions: In this third section of book the factors that would help one to make key strategic decisions are examined. 1. Vertical integration – moving forward into your customers’ markets or backwards to compete with suppliers. 2. Capacity expansion – you sell more, you want to expand but over-capacity is one of the most destructive contributors to intense competition in an industry as competitors get greedy and want more of the market or mis-read the market growth prospects. 3. Entry into new businesses – this may be through internal development or acquisition. The factors affecting diversification are examined here.


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