Biography

Michael PORTER

2009 ranking: 11

Michael E. Porter is the Bishop William Laurence University Professor at the Harvard Business School. He has an almost “living legend” status in the world of management thinking. He has written eighteen books and countless articles. In addition to his teaching he consults widely with the Monitor Group which he helped establish. Above and before everything he is an educator, either by the spoken or by the written word. But he is not a performer or management superstar. The Economist once commented that he was as likely to write a best-selling management blockbuster like … (the reader can no doubt supply an example) as to give a lecture wearing a bra and stockings (what an awful image!). Few of his books are available in paperback. He has advised both the public and private sectors throughout the world. Not only has he been showered with academic and business awards, he has even received civic medals usually reserved for military heroes or extraordinary sports people. Porter was for many years active in the US military’s reserve and was a celebrated college footballer, baseballer and golfer in his youth.

Porter was born in a university town – Ann Arbor, Michigan. His father was an army officer. He studied mechanical and aerospace engineering at Princeton and then switched to business, earning an MBA and a PhD in economics from Harvard. He later joined the faculty there.

Porter has always been obsessed by competition. His first widely-read book Competitive Strategy (1980) is now in its 63rd imprint. In it he analyses competition. There is

• natural competition and tension between existing players in an industry
• threats of new entrants to the market
• the prospect of substitute products or services
• the bargaining power of suppliers
• the bargaining power of consumers

There are three ways to compete effectively:

• produce a product or service either more cheaply,
• produce something that is better and different from the competition. He defined the latter as “differentiation”.
• dominate a niche market and close out the competitors.

He did not believe many companies could do all three or even two at a time. The particular strategy chosen depended on what type of company you had. He noted five:

• global
• fragmented
• emerging
• mature
• declining

The company also had to look at the series of links that went into its provision or production. He called this The Value Chain (and the name has stuck). He isolated five primary activities in any value chain.

• internal logistics -–getting the necessary materials
• production or provision
• external logistics and distribution;
• marketing
• after-sales services

These were each accompanied by a range of secondary activities. Each company’s value chain in turn fitted into a wider value system.

Porter subsequently moved from competition between firms to competition between nations. In The Competitive Advantage of Nations (1990) he examined how some states were wealthy and why others were not. The important element here were National Value Systems. He visualised these as akin to a four-sided diamond. The four components were:

• domestic rivalry – the tougher it was the better
• traditional economic resources
• infrastructure, including the education level of its citizens
• the cluster phenomenon.

The latter was very important, thought frequently overlooked. These were concentrations of particular types of industry in defined geographical areas. They embraced the low-tech Portuguese cork-makers and Silicon Valley. These areas can use economies of scale to attract workers and increase efficiency, as well as cross-subsidization and skills pools..

His study of national economies has been extensive, though not always welcome. In Can Japan Compete? (2000) he showed that the long and protracted recession suffered by Japan was the inevitable result of successive post-war Japanese governments’ policies.

His most recent research on competition has involved a look at America’s inner cities. He argues wealth creation is a sounder panacea for poverty and inequality reduction than redistributing wealth from elsewhere.

He has academically colonised much of the east coast of the United States with various centres supplied with full-time research staff working on a plethora of projects dear to his academic heart, from competition to inner-city development.

Essential Reading.

Competitive Strategy Techniques for Analyzing Industries and Competitors (1980)
Comparative Advantage (1985)
The Competitive Advantage of Nations (1990)
Can Japan Compete? (1999)

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