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Loyd E. Eskildson
- Publié sur Amazon.com
Michael Porter is the Harvard Business School's guru of strategy. He became a leading strategy guru by asking big questions, like 'Why are some companies more profitable than others?,' as well as the same question about industries and some countries. However, the usefulness of his ideas has been limited by the fact that they have not been summarized and sequenced into a single source. Author Joan Magretta brings not only her own credible credentials to this summary of Porter's strategy work, but has also had him review each chapter with her.
The key to competitive success, per Porter, lies in an organization's ability to create unique value. Competing to be unique is accomplished against a specific, relevant set of rivals (the industry). The company's relative position within its industry determines how its value will be created and what kind of value that will be.
A good competitive strategy will result in sustainably superior performance. 'Being #1 or #2 in and industry' (Welch, at G.E.), 'making key acquisitions,' 'doubling the number served (for a non-profit), and 'Don't be evil' (Google) do not tell how an organization will outperform the competition. Nor do they tell one where to compete.
With everyone chasing the same customer (the result when everyone's strategy is simply 'to be the best') every sale is contested, and price competition is the ultimate outcome. As for being #1 or #2, in many industries scale economies are exhausted at a relatively small market share. (G.M. was the world's largest auto manufacturer, and went bankrupt; BMW, much smaller, has earned superior returns vs. the industry.) Overpriced M&A, over-extension into all market segments, and price-cutting to gain market share can be disastrous. Most industries have multiple scale curves, each based on serving different markets. Competing to be unique, however, does not require one's rivals to fail; further, unlike sports, every company can choose the 'game' that it will compete in.
Competition is not just a direct contest between rivals - companies also are struggling for profits with their customers, suppliers, substitutes, and potential rivals. These 'five forces' determine profitability, and that industry structure, once past its emergent phase, is stable in the short-term but can change - eg. the emergence of Wal-Mart. If an industry doesn't create much value for its customers, prices will barely cover costs; on the other hand, industries can create lots of value for customers while the companies earn little. Porter also emphasizes that industry structure should be analyzed from an incumbent's perspective, and recognize entry barriers for new entrants.
Customers tend to be more price sensitive when they're buying an undifferentiated, expensive vs. other costs or income, and inconsequential to their own performance. Similarly with suppliers. Both customers and suppliers are more powerful when they are large and concentrated vs. fragmented, there are no short-term alternatives, switching costs and/or differentiation work in their favor, they can credibly threaten to vertically integrate into producing the industry's product itself.
Entry barriers can derive from scale economics, customer switching costs, network effects (eg. large suppliers with stability and good reputation - IBM; network size - Facebook), large required capital investments, proprietary technology/access to locked up distribution channels, government restrictions (eg. taxi license limits), likely incumbent retaliation (greater in slow growth and/or high fixed cost situations). Price competition is greater with undifferentiated products, high fixed and low marginal costs, perishable products. Other factors may be relevant, but are not structural - eg. government regulation, technology (eg. Internet - facilitated shopping around), complements (eg. availability of computer software). Growth might put suppliers into the driver's seat.
Apple having its own operating system avoids Microsoft's supplier power as well as providing differentiation; creating distinctive products limits buyer power; easing switching costs reduces rival power. Pacar competes for owner-operators, not fleet operators - thus, providing roadside assistance, customer features.
Profitability within an industry is determined by the firm's sequence of activities (value chain). ROIC is the appropriate measure. Improving operational effectiveness is an ongoing challenge, but it doesn't always lead to differentiation. Doing so requires a distinctive value proposition such as SWA, involving choosing customers and channels, customer needs to emphasize, price, and method of accomplishment. If you're trying to serve the same customers, meet the same needs, and sell at the same price - per Porter, you don't have a strategy.
Don't feel you have to delight every possible customer. Good execution is unlikely to be a source of sustainable advantage, but without it the best strategy will not provide superior performance. A good strategy makes clear what the organization won't do.
Sysco developed private labels to counteract the power of suppliers, added IT services to fend off small competitors.
Porter's points, though excellent, are not infallible. Intel, the dominant force in high-powered PC CPUs, is now likely to invade the market for mobile devices now dominated by ARM and its low-power chips. ARM, on the other hand, is seen likely to invade Intel's market. Why - the increasing convergence and overlap of the two markets.
Overall, the book is very readable, useful, and important.