Michael Porters Strategy
Michael Porters Strategy
Michael Porter is the University Professor (the highest honor in Harvard University) in Harvard Business School. He is acknowledged as the father of competitive strategy. He has two main theoretical perspectives; one is “the five forces model of competition”, and the other one is just the “three competition strategies” (Michael Porters Strategy).
The three competition strategies are cost leadership strategy, differentiation strategy and segmentation strategy. These strategies are used for people to achieve, maintain and even increase their competitiveness of their business. Porter thought that the purpose of these strategies is to make the business of the enterprises better than their competitors: some of the enterprises can gain higher revenue in some industries; however, in some other industries, the success of one of the strategies may just give the enterprise a little bit profit.
Porter also said that the possibility could be very low that the basic goal of an enterprise may be more than one. Because enterprises need to try their best to achieve one strategy and they also need organizational arrangement to support the strategy. If the enterprise has more than one goal, these resources will be dispersed.
Cost leadership strategy. This strategy asks the enterprises to establish efficient production line, decrease the cost on the basis of their experience, and control the cost of management and production cost, so as to reduce the costs of R&D (research and development), service, marketing, advertising, etc. In order to reach these goals, management need to be highly concentrated. If the enterprise has low cost, it means that this enterprise can earn more value when other enterprises lose profit in competition. Enterprises need to obtain high relative market share or other strength, such as good communication with raw material suppliers, to get the good status of the lowest total cost. This status is very attractive; because
Michael Porter is the University Professor (the highest honor in Harvard University) in Harvard Business School. He is acknowledged as the father of competitive strategy. He has two main theoretical perspectives; one is “the five forces model of competition”, and the other one is just the “three competition strategies” (Michael Porters Strategy).
The three competition strategies are cost leadership strategy, differentiation strategy and segmentation strategy. These strategies are used for people to achieve, maintain and even increase their competitiveness of their business. Porter thought that the purpose of these strategies is to make the business of the enterprises better than their competitors: some of the enterprises can gain higher revenue in some industries; however, in some other industries, the success of one of the strategies may just give the enterprise a little bit profit.
Porter also said that the possibility could be very low that the basic goal of an enterprise may be more than one. Because enterprises need to try their best to achieve one strategy and they also need organizational arrangement to support the strategy. If the enterprise has more than one goal, these resources will be dispersed.
Cost leadership strategy. This strategy asks the enterprises to establish efficient production line, decrease the cost on the basis of their experience, and control the cost of management and production cost, so as to reduce the costs of R&D (research and development), service, marketing, advertising, etc. In order to reach these goals, management need to be highly concentrated. If the enterprise has low cost, it means that this enterprise can earn more value when other enterprises lose profit in competition. Enterprises need to obtain high relative market share or other strength, such as good communication with raw material suppliers, to get the good status of the lowest total cost. This status is very attractive; because