Book Review: Michael Porter On Competition


it’s time for another book review! This time, our intern and ex-Deloitte dreamboat Preeti read Michael Porter’s book On Competition and took the time to let you know how she felt about it.

WHY READ IT?

Michael Porter is an industry heavyweight who’s won over 50 various awards; he has been recognized by several governments, large conglomerates and educational circles the world over. As an MBA graduate myself, I really value this man’s insights and contribution to the world of management.

In the book, Porter has addressed a number of key question like: “How do companies compete in a particular business?”, “What are the reasons for strategy in multi-business entities?”, “How do regions and nations compete?”, ” What ways does locations really matter for strategy?” and “How can a company link strategy with social issues?” This book’s main focus is bridging the gap between theory and practice, bringing all the concepts about competition, value creation and more under one roof.

QUICK OVERVIEW

This book is more chunky because it is an expanded version of the original. It has five parts.

Part I- Competition & Strategy: Core Concepts: This part lays out the core concepts of competitive strategy for companies first at the single industry level and then for diversified companies.

Part II- The competitiveness of locations: Addressing the role of location in competition among countries, states, cities.

Part III- Competitive solutions to societal problems: In this section, Porter touches on inequality issues, healthcare, urban poverty, disadvantages communities and expands on the win-win situation for both companies and society if these issues are addressed in the right way.

Part IV- Strategy, philanthropy & corporate social responsibility: Here, Porter discusses how in the world of scarce social resources and rising social needs, there is an urgency to let philanthropy have its imperial impact. The corporate sector is viewed as a model icon, both giving in the society and taking appropriate responsibility.

Part V- Strategy and leadership: A great discussion on recognizing that great leadership is required to achieve superior value creation. Each chapter represents an individual publication dating back to 1985 and captures the essence of his decades of research and thinking on this topic.

Reading this made me understand that having a strategy is like the way a rudder relates to a boat: it gives direction to key decisions in the consulting service world. All these insights enable a leader to view competitive strategy in a whole new way. Decisions in a corporation have a ripple effect on the economy, government, social structures and communities in the environment they are established in. Therefore, they need to be made with unabbreviated precision. If you have successfully navigated through to the end of this book, you will feel like you completed a rigorous three-credit business school course! Pretty cool!

INTERESTING BOOK INSIGHTS

Though the case studies mentioned in the book are old and (I believe) outdated, the topics they cover are timeless and can easily be woven into present day situations.

Through his examples, Porter is able to demonstrate effectively what he terms “positive sum competition” for both the private sector and non-profits. I can go on to say this: if you want to pursue an MBA and cannot afford to at this point due to cost, time etc, all you have to do is get Porter’s books and you’ll be able to talk the talk like a new, shiny graduate.

Here are some of my favorite insights from this book:

Five Forces that Shape Industry Competition – 1. The threat of new entrants. 2 Bargaining power of buyers. 3. Threat of substitute products and services. 4. Bargaining power of suppliers. 5. Rivalry among existing competitors. Basically, what he is saying is that any business leader who neglects to consider the potential power of forces beyond industry rivals runs the risk of managing an unprofitable, potentially failing business and overall negative impact on the society at large. What I enjoyed about this is the importance of being mindful of the factors that affect the work environment. Reading the signs in an economy is vital. We cannot just go by what the competitors are doing, we need to understand what works for our product and service and hence these five forces are important. This Porter’s Five Forces concept is used (even if it’s not named) in top strategy firms and ultimately even in cases, so if you take nothing else away, pay attention to this.

His Seven Surprises for New CEOs is insightful and a must-read for those in leadership positions, those reporting to new leaders, and those aspiring to advance beyond middle management. What I found interesting is that these seven surprises for CEOs are paramount to their growth and training. Every year the economic culture of the business is changing and shifting so fast, so last year’s tricks don’t work this year. Consistent training as well as debriefs of what to expect and what not to expect is vital. Also, because CEOs have to expend great responsibility and understanding in their jobs, providing them with an opportunity to expose them to the pros and cons is important.

Corporate Social Responsibility is a complete game changer. Porter mentions that CSR is not about throwing away money but about giving careful thought to what can actually yield long term competitive advantage and sustainable returns to the localized company but also to society at large. For the longest time, I personally thought that CSR was giving away money to be exempt from tax through donations and gifts and to show to the world “look what we did this time.” In On Competition, what I found fascinating was that CSR contributes to the growth, development and branding of a business. The heart and culture of the company is displayed through the partnerships CSR creates. Being part of the community and showing that the company cares is pretty important in today’s world. Employees want to work with employers who stand for something beyond profit and loss.

Some of the examples of companies with strong CSR mentioned here are Pepsi, Microsoft, Apple, Kodak, Fuji, Airbus, and Boeing.

OVERALL SUMMARY & CONCLUSION

This book is a must read. It is regarded as a classic on corporate strategy and competition, a business school bible, the epitome of innovation on competition. I will tell you this – it is a heavy book and by heavy I mean it has many great ideas and can take time to read, so if you’re not fully invested in getting to the end of this book, it can get boring. As I said earlier, the cases are old but there is a key takeaway waiting to impact you after every single one.

If you are involved in a leadership role and are determined to carve out a competitive niche in your own industry – then get this book. I’ll leave you with one final quote: “The essence of strategy is choosing what not to do.” Now, those are wise words from the Godfather of competition.

Get Michael Porter’s On Competition today.


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