Michael Porter Wisdom

Highlights:

Porter suggested that there were just three generic strategies for managers to choose from if they wanted to gain competitive advantage, something that he believed was the underlying purpose of every business.

You could make things as cheaply as possible and become the lowest cost producer in a market.

Alternatively you could offer something special or different which would allow you to command a premium price.

Or, thirdly, you could choose to be what he called a focused producer, looking to dominate in a niche market, so that others would find it too difficult to challenge you.

To help you choose which strategy to adopt, Porter says you need to decide which of five types of industry you are in:

fragmented
emerging
mature
declining
global

Then, he says, you need to examine the five forces of competition:

the threat of substitute products
the threat of new entrants
the bargaining power of suppliers
the bargaining power of buyers
the state of rivalry among existing companies

Always try to do things in ways that are hard for other companies to copy. Finding that unique position isn't always obvious, in the end, says Porter, it comes down to creativity and insight - and strong leadership, the willingness to make hard choices and to take a stand against the conventional wisdom of the industry.

In 'The Competitive Advantage of Nations', published in 1990, Porter moved his attention from the problems of competition in business to the issues of competing nations. Globalization, it seems, does not mean that everything is the same everywhere. National differences still matter.

There are four factors, Porter suggested, that help to make a nation competitive:

tough domestic rivalry
country resources
country infrastructure (including the educational quality of its workforce)
the cluster phenomenon

A cluster is a critical mass, in one geographical space, of similar businesses, all supported by their specialist suppliers and services that are tied to that industry. You can stay small, in other words, and still have the advantage of being big.