Michael porter’s contribution to strategic management

Abstract

is recognized as a leading authority on strategy and competitiveness. His works have generated analytical tools used by business schools, managers, and public policy makers: fi ve-forces analysis, generic strategies, the value chain, activity systems, the national diamond and industry innovation clusters. Broader applications of Porter's analytical frameworks have included health care, non-profi t organization strategy, economic development of inner cities, national competitiveness, clusters and innovation capacity, cross-industry linkages, environmental quality and competitiveness, and regional economic development (Institute for Strategy and Competitiveness, 2008). Prior to Porter, strategic management rested on the SWOT framework-strengths, weaknesses, opportunities and threats-developed by the general management group at Harvard (Andrews, 1971). This approach involved checklists of factors to assess opportunities and threats in the organization's external environment and strengths and weakness in its internal environment. Although widely used, the SWOT framework lacked an analytical foundation. Other approaches such as Chandler's strategy and structure framework (1962) supplemented SWOT, drawing on business history to show how a fi rm's strategy and structure responded to changes in the external environment. Porter's Competitive Strategy (1980) transformed strategic management in six ways. First, it applied microeconomics and industrial organization (IO) concepts to business level strategy to assess the attractiveness of an industry and positions within an industry. In the 1970s Porter had himself contributed to the IO literature, analyzing the relationship between fi rm performance and external factors including exit barriers, mobility barriers, branding, and market structure (Porter, 1976; Caves and Porter, 1977; Stonehouse and Snowdon, 2007). Second, the work turned the IO structure, conduct and performance approach on its head. IO had identifi ed barriers that reduced competition at the industry level. The new work asked: how could managers manipulate mobility barriers to achieve above average returns? Third, it extended the analysis of competitive forces beyond immediate rivals to include the power of suppliers and buyers, the threat of new entrants and the attraction of substitutes. The relative power of these forces determined the attractiveness and average returns of an industry. Fourth, it outlined a set of generic strategies that could create a long run defensible position with superior returns in a given industry: overall cost leadership, differentiation and focus. Fifth, it proposed BASE-Revista de Administração e Contabilidade da Unisinos 5(3):236-238, setembro/dezembro