Understanding Michael Porter: The Essential Guide to Competition and Strategy

  • Srinivasan S
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Abstract

What is the managerial understanding of strategy? That is the question which Joan Magretta sets out to answer in this lucid introduction to the work of Michael Eugene Porter. The significance of this question is related to the fact that Porter is not only an extremely rigorous thinker, but is quite prolific as well. Most readers have sampled his work and are acquainted with the technical terms of consequence, but may not have been able to put together the conceptual schema of competitive strategy as whole. Magretta's authorial intention then is to bring together the theories of 'competition' and 'strategy' in Porter's work into a cohesive argument that can serve as an introduction for those who wish to read further, or to serve as a corrective for those who might have misunderstood the significance of Porter's work. Magretta was educated at Harvard Business School, she has worked as a strategy consultant, served as Porter's editor at the Harvard Business Review, and is presently affiliated to the Institute for Strategy and Competitiveness which he heads at HBS. She is well acquainted with Porter's texts, his institutional contributions at HBS and HBR, and knows him well personally as a colleague (as evidenced not only by his cooperation with this project, but by his willingness to give her a number of sessions for the interview featured in this book in which he discusses at length both the scope of his ongoing work and some of the common misunderstandings that it has given rise to). Magretta is not attempting to summarize Porter's work as a whole, but focuses instead on those aspects that are relevant to making sense of the relationship between the terms 'competition' and 'strategy'. This book is not meant to be a comprehensive intellectual biography, but is a guide for managers who wish to actually apply its insights in the firms that they head. It is written with the firm conviction that Porter's work is not only the sine qua non for thinking about contemporary corporate strategy, but also provides the basic vocabulary for thinking sensibly about strategy in business academia. The book is divided into two parts: the first part focuses on competition and the second on strategy. These two parts are followed by an epilogue that sets out the 'implications' of Porter's work. It also has an interview in which Porter addresses frequently asked questions along with a glossary of technical terms that he uses in his work. There are also chapter notes and sources for those who wish to read further on competition and strategy. The first part sets out the theoretical lineaments of competition by analyzing the importance of the five forces model of competition, and explains the role of competitive advantage in strategic analysis. The relationship between the construction of a value chain and its implications for P&L are also set out. In the second part, Magretta analyzes what exactly is meant by the notion of value creation and the trade-offs that constitute strategy formulation and implementation. It also sets out the five tests of a good strategy along with a periodic reiteration of the need to have one. A firm can be said to have a strategy or to be thought of as thinking strategically only if it passes all the five tests. Understanding what these tests are by thinking through the challenges of each of these is an important part of Magretta's exposition of Porter's work. She finds that the significance of these tests is often overlooked in practice or is not even attempted in firms. This is one of those instances where she hopes her book will serve as a useful corrective for those who wish to practice the art of making strategic interventions in their firms. This book will also be a useful tool for consultants who have to make expository presentations to their clients on what exactly is the scope of their strategic recommendations, and the conditions that must be met, before their clients can determine the challenges of strategic implementation. Magretta's long years of experience as a consultant and researcher on strategy make her uniquely qualified to discuss these issues in a way that both managers and lay readers will be able to appreciate and deploy, if necessary, in their own turn. Magretta's writing strategy is not to cite the academic literature on these areas an end in itself, but to invoke as many case-based examples as deemed relevant in her own estimation in order to get her points across effectively. It might be a good idea if readers were to start with the Porter interview before moving on to the expository parts.

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Authors

  • Shiva Kumar Srinivasan

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