Michael Porter

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Michael Porter
Porter in 2017
Born
Michael Eugene Porter

(1947-05-23) May 23, 1947 (age 76)
Academic career
Alma mater
ContributionsPorter hypothesis
Porter's five forces[1]
Porter's four corners model
Websitewww.isc.hbs.edu

Michael Eugene Porter (born May 23, 1947)[2] is an American academic known for his theories on economics, business strategy, and social causes. He is the Bishop William Lawrence University Professor at Harvard Business School, and was one of the founders of the consulting firm The Monitor Group (now part of Deloitte) and FSG, a social impact consultancy. He is credited for creating Porter's five forces analysis, which is instrumental in business strategy development at present. He is generally regarded as the father of the modern strategy field.[3] He is also regarded as one of the world's most influential thinkers on management and competitiveness as well as one of the most influential business strategists.[4][5] His work has been recognized by governments, non governmental organizations and universities.[6]

Early life[edit]

Michael Porter's father was a civil engineer and Georgia Tech graduate who had also gone on to a career as an army officer. Michael Eugene Porter received a BSE with high honors in aerospace and mechanical engineering from Princeton University in 1969, where he graduated first in his class and was elected to Phi Beta Kappa and Tau Beta Pi. He received an MBA with high distinction in 1971 from Harvard Business School, where he was a George F. Baker Scholar, and a PhD in business economics from Harvard University in 1973.

His family moved around the United States, as well as to France and Canada, which exposed him to diverse cultures and economic environments. This nomadic lifestyle of his childhood, in combination with his academic training, led Porter to develop a keen interest in understanding the economic development of regions and countries. He was particularly intrigued by the differences in economic outcomes and competitiveness across different regions, and he sought to understand the underlying factors that contributed to these disparities.

Porter's interest in economic development led him to develop the concept of the "diamond" model of national competitive advantage, which highlights the interplay between a country's factor conditions, demand conditions, related and supporting industries, and firm strategy, structure, and rivalry. This framework has been widely adopted by policymakers and businesses alike to understand the factors that contribute to a country's economic success.

In addition to his academic work, Porter has also been a consultant to numerous governments and businesses, providing them with guidance on how to improve their competitiveness and promote economic growth. He has also been involved in several initiatives aimed at promoting sustainable economic development, such as the creation of the Initiative for a Competitive Inner City, which seeks to promote economic growth in poor urban areas.

Overall, Porter's childhood experiences of moving around the world, coupled with his academic training and consulting work, have greatly influenced his interest in understanding the economic development of regions and countries. His contributions to the field of economics have had a significant impact on both theory and practice, and his work continues to shape our understanding of what drives economic growth and competitiveness.

Porter said in an interview that he first became interested in competition through sports. He was on the NCAA championship golf squad at Princeton and also played football, baseball and basketball growing up.[7]

Porter credits Harvard professor Roland "Chris" Christensen with inspiring him and encouraging him to speak up during class, hand-writing Porter a note that began: "Mr. Porter, you have a lot to contribute in class and I hope you will." Porter reached the top of the class by the second year at Harvard Business School.[7]

At Harvard, Porter took classes in industrial organization economics, which attempts to model the effect of competitive forces on industries and their profitability. This study inspired the Porter five forces analysis framework for analyzing industries.[7]

Career[edit]

Michael Porter is the author of 20 books and numerous articles including Competitive Strategy, Competitive Advantage, Competitive Advantage of Nations, and On Competition. A six-time winner of the McKinsey Award for the best Harvard Business Review article of the year, Professor Porter is the most cited author in business and economics.[8]

Porter stated in a 2010 interview: "What I've come to see as probably my greatest gift is the ability to take an extraordinarily complex, integrated, multidimensional problem and get arms around it conceptually in a way that helps, that informs and empowers practitioners to actually do things."[7]

Outside In approach also known as Market Based View/Prescriptive approach which falls under the competitive positioning schools of thought are taught through using Porter's Five Forces model, Porter's Generic Strategies and Porter's Value Chain frameworks. During his illustrious career, he has emphasized the fact that strategy should not be merely chosen based on the majority of votes in a popularity contest and instead termed the essence of strategy is about making choices.[9][10] He has delivered public speaking based on the importance of strategy formulation and has served as a consultant to many governments and NGOs devising strategy formulations.

Competition among nations[edit]

Competitive Advantage[edit]

Porter wrote "The Competitive Advantage of Nations" in 1990. The book is based on studies of ten nations and argues that a key to national wealth and advantage was the productivity of firms and workers collectively, and that the national and regional environment supports that productivity.[11] He proposed the "diamond" framework, a mutually-reinforcing system of four factors that determine national advantage: factor conditions; demand conditions; related or supporting industries; and firm strategy, structure and rivalry. Information, incentives, and infrastructure were also key to that productivity.[12]

During April 2014, Porter discussed how the United States ranks relative to other countries on a comprehensive scorecard called "The Social Progress Index", an effort which he co-authored.[13] This scorecard rated the U.S. on a comprehensive set of metrics; overall, the U.S. placed 16th.[14]

Michael Porter defined the two ways in which an organization can achieve competitive advantage over its rivals: cost advantage and differentiation advantage. Cost advantage is when a business provides the same products and services as its competitors, albeit at a lesser cost. Differentiation advantage is when a business provides better products and services as its competitors. In Porter's view, strategic management should be concerned with building and sustaining competitive advantage.[15] He originally developed the Porter's Five Forces in 1979 which is still widely used as a model to analyse the industry and to estimate whether it would be profitable and ideal enough to enter the industry after carefully examining the bargaining power of buyers, bargaining power of suppliers, threat of new entrants, competition among existing firms and threat of substitutes.[16] He first wrote and published about Porter's Five Forces in a 1979 article How Competitive Forces Shape Strategy and has further explained about the Five Forces in his 1980 article Competitive Strategy: Techniques for Analyzing Industries and Competitors.[17]

Porter introduced the concept of competitive advantage in 1985 which later went onto become one of the key concepts in management science at present.[18] He also published a book titled Competitive Advantage: Creating and Sustaining Superior Performance in order to explain the concept of competitive advantage and the book which later went onto become a bestseller also focuses on value chain concept.[19]

Value chain[edit]

It was Porter who first coined and introduced the concept of value chain analysis which was another groundbreaking idea that changed the dynamics of how business activities are conducted.[20]

Healthcare[edit]

Porter has devoted considerable attention to understanding and addressing the pressing problems in health care delivery in the United States and other countries. His book, Redefining Health Care (written with Elizabeth Teisberg), develops a new strategic framework for transforming the value delivered by the health care system, with implications for providers, health plans, employers, and government, among other actors. The book received the James A. Hamilton award of the American College of Healthcare Executives in 2007 for book of the year. His New England Journal of Medicine research article, "A Strategy for Health Care Reform – Toward a Value-Based System" (July 2009), lays out a health reform strategy for the U.S. His work on health care is being extended to address the problems of health care delivery in developing countries, in collaboration with Dr. Jim Yong Kim, Dr. Kevin J. Bozic, Dr. Sachin H. Jain, and others at the Harvard Medical School and Harvard School of Public Health.

Consulting[edit]

In addition to his research, writing, and teaching, Porter serves as an advisor to business, government, and the social sector. He has served as strategy advisor to numerous leading U.S. and international companies, including Caterpillar, Procter & Gamble,[21] Scotts Miracle-Gro, Royal Dutch Shell, and Taiwan Semiconductor. The Instituto de Estudios Superiores de Administración of Venezuela was influenced under the guidance of Professor Porter, taught American business administration. Porter once served on two public boards of directors, those of Thermo Fisher Scientific and Parametric Technology Corporation.[citation needed] He also plays an active role in U.S. economic policy, working with the Executive Branch and with Congress, and has led national economic-strategy programs in numerous[quantify] countries. As of 2009 he was working with the presidents of Rwanda and South Korea.

In 1983, Michael Porter co-founded the Monitor Group, a strategy-consulting firm. Deloitte Consulting acquired the Monitor Group in 2013 through a structured bankruptcy proceeding.[22]

Non-profit[edit]

Michael Porter has founded four major non-profit organizations: Initiative for a Competitive Inner City – ICIC, founded in 1994,[23] and which he still chairs,[24] which addresses economic development in distressed urban communities; the Center for Effective Philanthropy, which creates rigorous tools for measuring foundation effectiveness; FSG Social Impact Advisors, a leading non-profit strategy firm which he co-founded with Mark Kramer,[25] serving NGOs, corporations, and foundations in the area of creating social value; and International Consortium for Health Outcomes Measurements (ICHOM), which he co-founded in 2012 with Stefan Larsson and Martin Ingvar. ICHOM supports the key strategic agenda items in Porter's Value-Based Health Care Delivery framework by working with patients and leading healthcare providers to create a global standard for measuring health outcomes.[26] He also currently serves on the Board of Trustees of Princeton University.

Honors and awards[edit]

In 2000, Michael Porter was appointed Bishop William Lawrence University Professor at Harvard, the university's highest recognition awarded to Harvard faculty.[27]

Criticisms[edit]

Porter's work has received critique from peers within academia for inconsistent logical argument in his assertions.[28] Porter's conclusions have been critiqued as "lacking in empirical support" and as "justified with selective case studies". In these analysis of his work it is asserted that Porter fails to credit original creators of his postulates originating from pure microeconomic theory.[8][29][30][31]

Legacy[edit]

He has written numerous books on modern competitive strategy for business.[32] His research work in strategic management has often been an important subject matter as far as the university system is concerned. His concepts and theories with regards to strategic management are given utmost priority in universities and colleges where his theories such as Porter's Five Forces, Porter's Diamond model, Porter's Generic Strategies and Porter's Value Chain are taught by lecturers and professors to the students. The assignments delegated to students often test how Porter's Five Forces and Porter's Diamond model can be used practically in making effective decisions when implementing appropriate and well thought out strategies.

Work[edit]

Competitive strategy[edit]

US political competitiveness[edit]

Domestic health care[edit]

Global health care[edit]

  • Jain SH, Weintraub R, Rhatigan J, Porter ME, Kim JY. "Delivering Global Health". Student British Medical Journal 2008; 16:27.
  • Kim JY, Rhatigan J, Jain SH, Weintraub R, Porter ME. "From a declaration of values to the creation of value in global health: a report from Harvard University's Global Health Delivery Project". Global Public Health. 2010 Mar; 5(2):181–88.
  • Rhatigan, Joseph, Sachin H Jain, Joia S. Mukherjee, and Michael E. Porter. "Applying the Care Delivery Value Chain: HIV/AIDS Care in Resource Poor Settings." Harvard Business School Working Paper, No. 09-093, February 2009.

Books and commentaries[edit]

  • Understanding Michael Porter: The Essential Guide to Competition and Strategy. Magretta, Joan. Boston: Harvard Business School Publishing, 2012.[34]
  • The Lords of Strategy: The Secret Intellectual History of the New Corporate World. Kiechel, Walter III. Harvard Business School Publishing, Boston, 2010.[35]
  • The Porter Hypothesis After 20 Years: How Can Environmental Regulation Enhance Innovation and Competitiveness? Stefan Ambec, Mark A. Cohen, Stewart Elgie, and Paul Lanoie. Resources for the Future Discussion Paper, Washington DC, 2011.
  • Well-Designed Environmental Regulations will Strengthen Companies' Competitiveness: Reviewing the Porter Hypothesis. Mitsuhashi Tadahiro (ed.) Japan, 2008.
  • From Adam Smith to Michael Porter: Evolution of Competitiveness Theory. Cho, Dong-Sung Cho and Hwy-Chang Moon. Asia-Pacific Business Series, Korea, 2000.[36]
  • “Retrospective: Michael Porter's Competitive Strategy.” Academy of Management Executive, May 2002, Vol. 16, No. 2
  • Perspectives on Strategy: Contributions of Michael E. Porter, F.A.J. van den Bosch and A.P. de Man (eds.), Kluwer Academic Publishers, Dordrecht, The Netherlands, 1997.[ISBN missing]
  • O Projecto Porter: A aplicação a Portugal 1993/94. Lisbon, Portugal: Ministério da Indústria e Energia, May 1995.[ISBN missing]
  • Sölvell, Ö. (2015), The Competitive Advantage of Nations 25 years – opening up new perspectives on competitiveness. Competitiveness Review, Vol. 25 No. 5, pp. 471-481. https://doi.org/10.1108/CR-07-2015-0068.

See also[edit]

References[edit]

  1. ^ Porter, Michael (January 1, 2008). "The Five Competitive Forces That Shape Strategy". Harvard Business Review.
  2. ^ date & year of birth, full name according to LCNAF CIP data
  3. ^ Ascend, H. B. R. (September 21, 2017). "The job of a leader is just to keep learning, says Harvard's Michael Porter". mint. Retrieved October 10, 2022.
  4. ^ Schawbel, Dan. "Michael E. Porter on Why Companies Must Address Social Issues". Forbes. Retrieved October 10, 2022.
  5. ^ Weinreb, James Epstein-Reeves and Ellen (September 25, 2013). "Michael Porter: coining vital business strategies for sustainability". the Guardian. Retrieved October 10, 2022.
  6. ^ "Michael E. Porter - Faculty & Research - Harvard Business School". www.hbs.edu. Retrieved October 10, 2022.
  7. ^ a b c d Kiechel, Walter (2010). The Lords of Strategy. Harvard Business Press. ISBN 978-1-59139-782-3.
  8. ^ a b Aktouf, Omar (January 24, 2008). "The False Expectations of Michael Porter's Strategic Management Framework". Gestão & Planejamento – G&P. 1 (11). Retrieved January 27, 2019 – via revistas.unifacs.br.
  9. ^ Warsia, Noor Fathima. "The Essence Of Strategy Is Making Choices: Michael E Porter". BW Businessworld. Retrieved October 10, 2022.
  10. ^ Denning, Stephanie. "The Collapse Of Strategy And Its Implications". Forbes. Retrieved October 10, 2022.
  11. ^ Porter, Michael E. (March 1, 1990). "The Competitive Advantage of Nations". Harvard Business Review. ISSN 0017-8012. Retrieved October 10, 2022.
  12. ^ Porter, Michael E. Porter (1990). The Competitive Advantage of Nations. Free Press. ISBN 978-0-684-84147-2.
  13. ^ "Michael Porter on GPS: Is the U.S. #1?". Retrieved January 27, 2019.
  14. ^ "2018 Social Progress Index". 2018 Social Progress Index. Retrieved January 27, 2019.
  15. ^ Porter, Michael E. (1985). Competitive Advantage. Free Press. ISBN 978-0-684-84146-5.
  16. ^ "Analyzing the Competition with Porter's Five Forces - businessnewsdaily.com". Business News Daily. Retrieved October 10, 2022.
  17. ^ "'Five Forces' That Make or Break Consumer Brands". Practical Ecommerce. August 26, 2021. Retrieved October 10, 2022.
  18. ^ Francis, Abey (March 18, 2016). "Market-Based and Resource-Based Theories of Competitive Advantage". MBA Knowledge Base. Retrieved October 10, 2022.
  19. ^ Porter, Michael E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press. ISBN 978-0-02-925090-7.
  20. ^ "What Is Value Chain Analysis and How Do You Use It?". Business News Daily. Retrieved October 10, 2022.
  21. ^ Playing to Win: How Strategy Really Works. Harvard Business Review Press. February 5, 2013.
  22. ^ Compare: Prasad, Sakthi (November 8, 2012). "Monitor Company files for Chapter 11; Deloitte to buy assets". Market news. Reuters. Reuters. Retrieved June 17, 2018. U.S. consulting and advisory firm Monitor Company Group and its affiliates filed for Chapter 11 bankruptcy protection, court documents showed, and said it has agreed to sell its assets to global consultancy firm Deloitte.
  23. ^ "Initiative for a Competitive Inner City".
  24. ^ Initiative for a Competitive Inner City, Board, accessed 9 December 2019
  25. ^ FSG, Our People, accessed 10 December 2019
  26. ^ "Affiliated organizations institutions".
  27. ^ Colvin, Geoff (October 29, 2012). "There's No Quit in Michael Porter". Fortune. 166 (7): 162–166.
  28. ^ Sharp, Byron; Dawes, John (1996), "Is Differentiation Optional? A Critique of Porter's Generic Strategy Typology," in Management, Marketing and the Competitive Process, Peter Earl, Ed. London: Edward Elgar.[ISBN missing]
  29. ^ Speed, Richard J. (1989), "Oh Mr Porter! A Re-Appraisal of Competitive Strategy," Marketing Intelligence and Planning, 7 (5/6), 8–11.
  30. ^ Yetton, Philip, Jane Craig, Jeremy Davis, and Fred Hilmer (1992), "Are Diamonds a Country's Best Friend? A Critique of Porter's Theory of National Competition as Applied to Canada, New Zealand and Australia," Australian Journal of Management, 17 (No. 1, June), 89–120.
  31. ^ Allio, Robert J. (1990), "Flaws in Porter's Competitive Diamond?," Planning Review, 18 (No. 5, September/October), 28–32.
  32. ^ Porter, Michael (October 7, 2013), The case for letting business solve social problems, retrieved October 10, 2022
  33. ^ Bedeian, Arthur G.; Wren, Daniel A. (Winter 2001). "Most Influential Management Books of the 20th Century" (PDF). Organizational Dynamics. 29 (3): 221–25. doi:10.1016/S0090-2616(01)00022-5.
  34. ^ Magretta, Joan (2011). Understanding Michael Porter: The Essential Guide to Competition and Strategy. Harvard Business Review Press. ISBN 978-1422160596.
  35. ^ Kiechel, Walter (2010). The Lords of Strategy: The Secret Intellectual History of the New Corporate World. Harvard Business Review Press. ISBN 978-1591397823.
  36. ^ Cho, Dong-Sung (2013). From Adam Smith to Michael Porter: Evolution of Competitiveness Theory. World Scientific Publishing Company. ISBN 978-9814407540.

External links[edit]

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