Jan 29 2007
Reading Michael Porter
I first heard of Porter when I read Huntington’s Culture Matters.
In the strategy class, we are assigned to his reading. The one I just read, “What Is Strategy?” is a great essay. Basically, Porter made the argument that Strategy is:
1. Being different;
2. Making trade-offs;
3. Building fit activities (to reinforce competitive edge/unique values);
It is hard to find fault with this kind of logic of course. My prof. said there are two things missing in Porter’s framework: the 5 force is a snapshot analysis that devoid of market trend or demand shifts (e.g. being totally exogenous).
What I see the biggest weakness in his theory is the lack of consideration of risks. His analysis only makes sense, his definition of strategy being true, if there is no significant risks involved in any of the three objectives.
However, in real life, this is far from the truth. Only startup companies can afford to take chances. Large companies, with a few exceptions, have to consider the risk involved.
Another thing he is missing in his work is a constrain line that is tangent to the position frontier. The constrain line is a combination of limitation of resources, aversion to risks (due to capital structure for example) and other organizational factors–which maps roughly to the “activity system” of his.
Then again, Porter has an IQ of 180… we are definitely on different intelligence frontiers.