Michael Porter’s contribution to the field of strategic management

Q2. Michael Porter’s contribution to the field of strategic management

Porter’s strategic thought and overview of tools developed

Porter’s views on strategy are clearly featured in his 1996 article ‘What is Strategy?’ in which he sought to redefine the meaning of strategic management (Stonehouse and Snowdon, 2007). His emphasis was on separation between strategy and operational effectiveness. His concentration was on the corporate level and how they can use strategic management as the underlying approach to ensure that sustainable competitive advantage is created. Porter is perhaps best known from some of the strategic management tools that he developed including Porter’s Generic Strategies Model; Porter’s Five Forces Model, and the Value Chain (Porter, 2008; Stonehouse and Snowdon, 2007). In spite of the fact that the models focus both on the internal and external environments, the underlying focus for Porter appears to be on the external factors.

Porter emphasises the fact that the external environment exerts pressures on the organisation’s ability to be competitive in the market. For instance, Porter holds that increased competition limits profitability (Das Gandhi, Selladurai and Santhi, 2006). In line with this, Porter developed the Five Forces model for analysing the level of rivalry within industries. Competitive advantage is enhanced using the Porter’s Generic Strategies that focus on how to compete after considering the external factors (Akan, et al., 2006). Porter’s contribution in creating the value chain on the other hand evaluates the internal processes that lead to value creation for organisations. Alternative strategies for enhancing competitive advantage are accordingly factored into the organisation by modifying the different elements of the value chain. The critique of Porter’s approaches is as below:

Critique of Porter’s ideology 

Porter’s emphasis on external environment factors is well founded. The organisation operates within an external environment where actions of competitors and others players influence the performance of the organisation. This firm basis is nevertheless not supported by a comprehensive approach of analysing the external environment. Porter’s external environment analysis primarily focuses on competitor activities where the five forces within the industry are evaluated (Sheehan and Foss, 2009). The weakness of this model is that it relies on estimations and this means that one can easily miscalculate the level of industry rivalry. Moreover, certain factors in the external environment have not been factored in. For instance, the influence of government on strategy is very crucial yet it has not been factored in.

Another flaw in Porter’s strategic management is the suggested approaches for enhancing competitive advantage. This model is lacking in the range of suggestions. A more reliable approach would be to break down the elements of the generic strategies in a manner that can guide the creation of a strategy mix for the organisation. Besides, the model fails to provide a framework for evaluation and development of the internal capabilities needed to implement the strategic options suggested. Despite these flaws, the models proposed by Porter provide a good framework for understanding and guiding organisational strategies. They facilitate evaluation and appreciation of the importance of the external environment. The deficiencies in the models can be overcome by combining Porter’s models with others. For instance, the Five Forces for industry analysis can be used in conjunction with the PESTEL model for analysing the macro environment for better understanding of external environment factors.

References

Akan, O., Allen, R.S., Helms, M.M., Spralls, S.A., 2006. Critical tactics for implementing Porter's generic strategies. The Journal of Business Strategy 27(1), pp. 43-53

Das Gandhi, N.M., Selladurai, V., Santhi, P., 2006. Unsustainable development to sustainable development: a conceptual model. Management of Environmental Quality 17(6), 654-672

Porter, M., 2008. The Five Competitive Forces that Shaper Strategy, Harvard Business Review, January, pp. 78‐84

Sheehan, N.T., Foss, N.J., 2009. Exploring the roots of Porter's activity-based view. Journal of Strategy and Management 2(3), pp. 240-260

Stonehouse, G., Snowdon, B., 2007. Competitive Advantage Revisited: Michael Porter on Strategy and Competitiveness, Journal of Management Inquiry 36(3), pp. 256‐273