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Michael Porter (born 1947) is the doyen of living management gurus, a professor at Harvard Business School whose office is a whole on-campus house, home of his own Institute for Strategy and Competitiveness. A talented sportsman (like Frederick Winslow Taylor), Porter could have became a professional golf player.

The Economist once said (see article): "His work is academic to a fault. Mr Porter is about as likely to produce a blockbuster full of anecdotes and boosterish catchphrases as he is to deliver a lecture dressed in bra and stockings." He has been criticised for his willingness to boil his thoughts down into a series of bullet points, each of them with a ploddingly unmemorable title. Unlike many of his colleagues, Porter is frustratingly unquotable. Charles Handy once said: "Influence, not popularity, is what Michael Porter wants." He never, for example, allows his books to be published in paperback.

"Billions are wasted on ineffective philanthropy. Philanthropy is decades behind business in applying rigorous thinking to the use of money"

Nevertheless, Porter effectively redefined the way that businessmen think about competition, largely by introducing the language and concepts of economics into corporate strategy. He began by simplifying the notion of competitive advantage and then created a new framework for companies to think about how to achieve it.

Later he moved on to advising countries about how they too could gain competitive advantage, and this led him to another field of interest, clustering-the extent to which industries old and new (from diamond dealers to nanotechnologists) stay geographically close to each other, and the reasons for this. Porter maintained that countries do well economically in large part because of this clustering of specialised skills and industries that, through dynamic competition between them, produce superior products and processes.

More recently, Porter has started to write about health care and corporate social responsibility, applying his thinking about competition to social issues. Indeed, so broad did his interests become that in 2000 he was made a professor of Harvard University, with a free-ranging remit, only the fourth Harvard Business School faculty member ever to be so honoured.

Like many leading management thinkers, Porter trained first as an engineer. Then, after a doctorate in economics, he moved to Harvard Business School. Apart from being a bestselling author, Porter also found time to set up a successful global consulting firm called Monitor. He can command top-dollar fees for personal appearances-his own competitive weapon being differentiation, not low cost.

Notable publications

" Competitive Strategy: Techniques for Analysing Industries and Competitors ", Free Press, New York, 1980; 2nd edn, Free Press, New York and London, 1998

" Competitive Advantage: Creating and Sustaining Superior Performance ", Collier Macmillan, London, 1985; 2nd edn, Free Press, New York and London, 1998

" What is Strategy?", Harvard Business Review, November-December 1996

" Strategy and the Internet", Harvard Business Review, March 2001

With Kramer, M., " Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility", Harvard Business Review, December 2006

More management gurus

This profile is adapted from "The Economist Guide to Management Ideas and Gurus", by Tim Hindle (Profile Books; 322 pages; £20). The guide has the low-down on more than 50 of the world's most influential management thinkers past and present and over 100 of the most influential business-management ideas. To buy this book, please visit our online shop.

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Michael Porter (born 1947) is the doyen of living management gurus, a professor at Harvard Business School whose office is a whole on-campus house, home of his own Institute for Strategy and Competitiveness. A talented sportsman (like Frederick Winslow Taylor), Porter could have became a professional golf player.

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The bargaining power of buyers     - Rajat

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The bargaining power of buyers     - Rajat

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Refers to an advantage to consumers that comes from gathering together to put collective pressure on producers to lower prices or improve quality. The bargaining power of buyers typically has the strongest effect on pricing when buyers are organized and they collectively account for much of the producer's income, they are interested in a product that has an excess of suppliers, and they are interested in making substantial purchases.

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- Rajat

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The Bargaining Powers of Buyers
Businesses need to conduct an assessment of how easy it is for buyers to drive the prices down as they are often able to dictate the terms of their buying. This is driven by the number of buyers in the market and the importance of each buyer to the business. For example, Coles and Woolworths gain customers by lowering their prices of essential foods to draw buyers away from competitors.

- Lucy

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The Rivalry Among Existing Competitors
Competition is driven by the number and capability of competitors in the market. However, if their products and services do not differentiate, this can cause an overall reduced market attractiveness.

- Lucy

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The Bargaining Powers of Suppliers
Suppliers can increase the price of the items they supply to the business through drivers of the number of suppliers of each essential input, the uniqueness of their product or service and the size and strength of the supplier. All of which, are also driven by existing contracts and the time required to undertake this change.

- Lucy

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The number of competitors in a market. If a market has a substantial number of businesses that sell undifferentiated products, the market loses its overall attractiveness.

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- Rajat

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New competitors will enter into a market in which they see will will be successful and profitable. As new competitors are added and the market grows, the existing business' must ensure they act in a way that is able to survive and keep their current customers.

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HBS] Michael Porter on Competitive Strategy [Part 2]

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Uploaded by Trinh Quang Minh on 2013-09-05.

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Businesses that operate in the same market where similar products exist. E.g. Coke and Pepsi.
Customers switch between the alternative products in a market in response to price or quality of goods/services.
-> It reduces the attractiveness of the market and businesses will find difficulties with maintaining and building a set customer base.
-> Suppliers will also face difficulty in their contracts with businesses, especially when they rely on profit from businesses to continue their processes.
-> Competing with global substitutes.

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The Threat Of Substitutes

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The Rivalry Among Existing Competitors

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The Entry of New Competitors
Current businesses in an industry must always be prepared to deal with new competitors by placing barriers between them, their competitors in the industry and possible new competitors. Barriers include patents, economies of scale (‘spending less to create more’ = mass production = the more you produce, the more cost and waste efficient you are) and supportive government policies or where the financial costs of commencing operations is prohibitive.

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The Threat of Substitutes
Businesses that operate in the same market whee close substitutes exist. Customers often change preferences in products and services in response to price increases or changes in quality of the good or service offered by the business. Examples include Coke and Pepsi or banks in regards to interest rates and home loans.

- Lucy

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Profitable markets always attract new businesses, as these businesses see an opportunity to make a profit, make sales and expand their operations. Although it may be hard for existing businesses to adapt to the new environment, barriers such as patents, economies of scale and supportive government policies support the existing businesses. If the barriers do not help the business, their piece of the market share will decrease due to the more efficient and productive new businesses.

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The Bargaining Power of Suppliers - Liam

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The Bargaining Power of Suppliers - Liam

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Refers to suppliers' ability to easily increase the price of the item they sell to a business. This can be as a result of uniqueness of product or service, size and strength of supplier, cost of switching to another supplier, and number of suppliers of each essential input.

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The Bargaining Powers of Buyers
Businesses need to conduct an assessment of how easy it is for buyers to drive the prices down as they are often able to dictate the terms of their buying. This is driven by the number of buyers in the market and the importance of each buyer to the business. For example, Coles and Woolworths gain customers by lowering their prices of essential foods to draw buyers away from competitors.

- Lucy

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Forces Identified by Porter that exert pressure on a business

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Forces Identified by Porter that exert pressure on a business

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The forces identified by Porter are: the entry of new competitors, the bargaining power of buyers, the threat of substitutes, the bargaining power of suppliers, the rivalry among existing competitors, the generic strategies approach, lower cost strategies and
differentiation strategies.