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94-423: Michael Porter identifies three principles underlying strategy: Corporate strategy involves answering a key question from a portfolio perspective: "What business should we be in?" Business strategy involves answering the question: "How shall we compete in this business?" Alternatively, corporate strategy is strategic management of a corporation (a particular legal structure of a business); business strategy

188-466: A "political industry", that competes in ways that serve the parties' interests rather than the public good. Gehl and Porter published a Harvard Business School report on the topic, "Why Competition in the Politics Industry is Failing America" (2017), and later a book, The Politics Industry: How Political Innovation Can Break Partisan Gridlock and Save Our Democrac y (2020). In 2000, Michael Porter

282-406: A "political industry", that competes in ways that serve the parties' interests rather than the public good. Gehl and Porter published a Harvard Business School report on the topic, "Why Competition in the Politics Industry is Failing America" (2017), and later a book, The Politics Industry: How Political Innovation Can Break Partisan Gridlock and Save Our Democrac y (2020). In 2000, Michael Porter

376-430: A 2010 interview: "What I've come to see as probably my greatest gift is the ability to take an extraordinarily complex, integrated, multidimensional problem and get arms around it conceptually in a way that helps, that informs and empowers practitioners to actually do things." Michael Porter Michael Eugene Porter (born May 23, 1947) is an American businessman and professor at Harvard Business School . He

470-416: A company must only choose one of the three or risk that the business would waste precious resources. Porter's generic strategies detail the interaction between cost minimization strategies, product differentiation strategies, and market focus strategies. Porter described an industry as having multiple segments that can be targeted by a firm. The breadth of its targeting refers to the competitive scope of

564-400: A firm from its rivals. A robust competitive position cumulates from many activities which should fit coherently together. Porter wrote in 1985: "Competitive advantage cannot be understood by looking at a firm as a whole. It stems from the many discrete activities a firm performs in designing, producing, marketing, delivering and supporting its product. Each of these activities can contribute to

658-409: A firm's relative cost position and create a basis for differentiation...the value chain disaggregates a firm into its strategically relevant activities in order to understand the behavior of costs and the existing and potential sources of differentiation." Michael Porter Michael Eugene Porter (born May 23, 1947) is an American businessman and professor at Harvard Business School . He

752-402: A framework for analyzing the profitability of industries and how those profits are divided among the participants in 1980. In five forces analysis he identified the forces that shape the industry structure or environment. The framework involves the bargaining power of buyers and suppliers, the threat of new entrants, the availability of substitute products, and the competitive rivalry of firms in

846-435: A long-term coordinated strategy was necessary to give a company structure, direction and focus. He says it concisely, "structure follows strategy." Chandler wrote that: " Strategy is the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals ." Igor Ansoff built on Chandler's work by adding concepts and inventing

940-437: A model to analyse the industry and to estimate whether it would be profitable and ideal enough to enter the industry after carefully examining the bargaining power of buyers, bargaining power of suppliers, threat of new entrants, competition among existing firms and threat of substitutes. He first wrote and published about Porter's Five Forces in a 1979 article How Competitive Forces Shape Strategy and has further explained about

1034-437: A model to analyse the industry and to estimate whether it would be profitable and ideal enough to enter the industry after carefully examining the bargaining power of buyers, bargaining power of suppliers, threat of new entrants, competition among existing firms and threat of substitutes. He first wrote and published about Porter's Five Forces in a 1979 article How Competitive Forces Shape Strategy and has further explained about

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1128-600: A search for sources of competitive advantage. By the 1960s, the capstone business policy course at the Harvard Business School included the concept of matching the distinctive competence of a company (its internal strengths and weaknesses) with its environment (external opportunities and threats) in the context of its objectives. This framework came to be known by the acronym SWOT and was "a major step forward in bringing explicitly competitive thinking to bear on questions of strategy". Kenneth R. Andrews helped popularize

1222-486: A shift from the production focus to market focus. The prevailing concept in strategy up to the 1950s was to create a product of high technical quality. If you created a product that worked well and was durable, it was assumed you would have no difficulty profiting. This was called the production orientation . Henry Ford famously said of the Model T car: "Any customer can have a car painted any color that he wants, so long as it

1316-472: A valuable product or service for the market. These include functions such as inbound logistics, operations, outbound logistics, marketing and sales, and service, supported by systems and technology infrastructure. By aligning the various activities in its value chain with the organization's strategy in a coherent way, a firm can achieve a competitive advantage. Porter also wrote that strategy is an internally consistent configuration of activities that differentiates

1410-445: A variety of factors, such as the learning curve , substitution of labor for capital (automation), and technological sophistication. Author Walter Kiechel wrote that it reflected several insights, including: Kiechel wrote in 2010: "The experience curve was, simply, the most important concept in launching the strategy revolution...with the experience curve, the strategy revolution began to insinuate an acute awareness of competition into

1504-535: A vocabulary. He developed a grid that compared strategies for market penetration, product development, market development and horizontal and vertical integration and diversification. He felt that management could use the grid to systematically prepare for the future. In his 1965 classic Corporate Strategy , he developed gap analysis to clarify the gap between the current reality and the goals and to develop what he called "gap reducing actions". Ansoff wrote that strategic management had three parts: strategic planning ;

1598-523: Is also used in relation to marketing , where the variable "importance" is related to buyers' perception of important attributes of a product: for attributes which might be considered important to buyers, both their perceived importance and their performance are assessed. The concept of the corporation as a portfolio of business units, with each plotted graphically based on its market share (a measure of its competitive position relative to its peers) and industry growth rate (a measure of industry attractiveness),

1692-430: Is asserted that Porter fails to credit original creators of his postulates originating from pure microeconomic theory. He has written numerous books on modern competitive strategy for business. His concepts and theories with regards to strategic management, such as Porter's Five Forces, Porter's Diamond model , Porter's Generic Strategies and Porter's Value Chain, are widely taught in universities. Porter stated in

1786-430: Is asserted that Porter fails to credit original creators of his postulates originating from pure microeconomic theory. He has written numerous books on modern competitive strategy for business. His concepts and theories with regards to strategic management, such as Porter's Five Forces, Porter's Diamond model , Porter's Generic Strategies and Porter's Value Chain, are widely taught in universities. Porter stated in

1880-452: Is black." Management theorist Peter F Drucker wrote in 1954 that it was the customer who defined what business the organization was in. In 1960 Theodore Levitt argued that instead of producing products then trying to sell them to the customer, businesses should start with the customer, find out what they wanted, and then produce it for them. The fallacy of the production orientation was also referred to as marketing myopia in an article of

1974-481: Is normative. It consists of the schools of informal design and conception, the formal planning, and analytical positioning. The second group, consisting of six schools, is more concerned with how strategic management is actually done, rather than prescribing optimal plans or positions. The six schools are entrepreneurial, visionary, cognitive, learning/adaptive/emergent, negotiation, corporate culture and business environment. The third and final group consists of one school,

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2068-448: Is the author of 20 books and numerous articles including Competitive Strategy , Competitive Advantage , Competitive Advantage of Nations , and On Competition , and is the most cited author in business and economics. Porter wrote The Competitive Advantage of Nations in 1990. The book is based on studies of ten nations and argues that a key to national wealth and advantage was the productivity of firms and workers collectively, and that

2162-448: Is the author of 20 books and numerous articles including Competitive Strategy , Competitive Advantage , Competitive Advantage of Nations , and On Competition , and is the most cited author in business and economics. Porter wrote The Competitive Advantage of Nations in 1990. The book is based on studies of ten nations and argues that a key to national wealth and advantage was the productivity of firms and workers collectively, and that

2256-426: Is the strategic management of a business . Management theory and practice often make a distinction between strategic management and operational management , where operational management is concerned primarily with improving efficiency and controlling costs within the boundaries set by the organization's strategy . Strategy is defined as "the determination of the basic long-term goals of an enterprise, and

2350-454: Is when a business provides the same products and services as its competitors, albeit at a lesser cost. Differentiation advantage is when a business provides better products and services as its competitors. In Porter's view, strategic management should be concerned with building and sustaining competitive advantage. He originally developed the Porter's Five Forces in 1979 which is still widely used as

2444-405: Is when a business provides the same products and services as its competitors, albeit at a lesser cost. Differentiation advantage is when a business provides better products and services as its competitors. In Porter's view, strategic management should be concerned with building and sustaining competitive advantage. He originally developed the Porter's Five Forces in 1979 which is still widely used as

2538-484: The Porter five forces analysis framework for analyzing industries, inspired by classes in industrial organization economics that he took at Harvard. During his career, Porter has emphasized that the essence of strategy is about making choices. He has delivered public speaking based on the importance of strategy formulation and has served as a consultant to many governments and NGOs devising strategy formulations. Porter

2632-437: The Porter five forces analysis framework for analyzing industries, inspired by classes in industrial organization economics that he took at Harvard. During his career, Porter has emphasized that the essence of strategy is about making choices. He has delivered public speaking based on the importance of strategy formulation and has served as a consultant to many governments and NGOs devising strategy formulations. Porter

2726-471: The Harvard Medical School and Harvard School of Public Health . Porter acting as a consultant to business, government, and the social sector . He has been a strategy advisor to US and international companies, including Caterpillar , Procter & Gamble , Scotts Miracle-Gro , Royal Dutch Shell , and Taiwan Semiconductor . The Instituto de Estudios Superiores de Administración of Venezuela

2820-407: The Harvard Medical School and Harvard School of Public Health . Porter acting as a consultant to business, government, and the social sector . He has been a strategy advisor to US and international companies, including Caterpillar , Procter & Gamble , Scotts Miracle-Gro , Royal Dutch Shell , and Taiwan Semiconductor . The Instituto de Estudios Superiores de Administración of Venezuela

2914-426: The experience curve . Companies that pursued the highest market share position to achieve cost advantages fit under Porter's cost leadership generic strategy, but the concept of choice regarding differentiation and focus represented a new perspective. Porter's 1985 description of the value chain refers to the chain of activities (processes or collections of processes) that an organization performs in order to deliver

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3008-410: The means (policies) by which it is seeking to get there." He continued that: "The essence of formulating competitive strategy is relating a company to its environment." Some complexity theorists define strategy as the unfolding of the internal and external aspects of the organization that results in actions in a socio-economic context. Michael D. Watkins claimed in 2007 that if mission/goals answer

3102-482: The 'what' question, or if vision answers the 'why' questions, then strategy provides answers to the 'how' question of business management. The strategic management discipline originated in the 1950s and 1960s. Among the numerous early contributors, the most influential were Peter Drucker , Philip Selznick , Alfred Chandler, Igor Ansoff , and Bruce Henderson. The discipline draws from earlier thinking and texts on ' strategy ' dating back thousands of years. Prior to 1960,

3196-542: The Center for Effective Philanthropy, which creates rigorous tools for measuring foundation effectiveness; FSG Social Impact Advisors, a leading non-profit strategy firm which he co-founded with Mark Kramer, serving NGOs, corporations, and foundations in the area of creating social value; and International Consortium for Health Outcomes Measurements (ICHOM), which he co-founded in 2012 with Stefan Larsson and Martin Ingvar. ICHOM supports

3290-444: The Center for Effective Philanthropy, which creates rigorous tools for measuring foundation effectiveness; FSG Social Impact Advisors, a leading non-profit strategy firm which he co-founded with Mark Kramer, serving NGOs, corporations, and foundations in the area of creating social value; and International Consortium for Health Outcomes Measurements (ICHOM), which he co-founded in 2012 with Stefan Larsson and Martin Ingvar. ICHOM supports

3384-517: The Corporate Level 2014 In 1980, Porter defined the two types of competitive advantage an organization can achieve relative to its rivals: lower cost or differentiation . This advantage derives from attribute(s) that allow an organization to outperform its competition, such as superior market position, skills, or resources. In Porter's view, strategic management should be concerned with building and sustaining competitive advantage. Porter developed

3478-486: The Five Forces in his 1980 article Competitive Strategy: Techniques for Analyzing Industries and Competitors. Porter introduced the concept of competitive advantage in 1985. which later went onto become one of the key concepts in management science at present. He also published a book titled Competitive Advantage: Creating and Sustaining Superior Performance in order to explain the concept of competitive advantage and

3572-432: The Five Forces in his 1980 article Competitive Strategy: Techniques for Analyzing Industries and Competitors. Porter introduced the concept of competitive advantage in 1985. which later went onto become one of the key concepts in management science at present. He also published a book titled Competitive Advantage: Creating and Sustaining Superior Performance in order to explain the concept of competitive advantage and

3666-639: The James A. Hamilton award of the American College of Healthcare Executives in 2007 for book of the year. His New England Journal of Medicine research article, "A Strategy for Health Care Reform – Toward a Value-Based System" (July 2009), lays out a health reform strategy for the US. His work on health care is employed to address the health care delivery problems in developing countries, in collaboration with Dr. Jim Yong Kim , Dr. Kevin J. Bozic, and others at

3760-487: The James A. Hamilton award of the American College of Healthcare Executives in 2007 for book of the year. His New England Journal of Medicine research article, "A Strategy for Health Care Reform – Toward a Value-Based System" (July 2009), lays out a health reform strategy for the US. His work on health care is employed to address the health care delivery problems in developing countries, in collaboration with Dr. Jim Yong Kim , Dr. Kevin J. Bozic, and others at

3854-408: The US ranks relative to other countries on a comprehensive scorecard called "The Social Progress Index", an effort which he co-authored. This scorecard rated the US on a comprehensive set of metrics; overall, the US placed 16th. Michael Porter defined the two ways in which an organization can achieve competitive advantage over its rivals: cost advantage and differentiation advantage. Cost advantage

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3948-408: The US ranks relative to other countries on a comprehensive scorecard called "The Social Progress Index", an effort which he co-authored. This scorecard rated the US on a comprehensive set of metrics; overall, the US placed 16th. Michael Porter defined the two ways in which an organization can achieve competitive advantage over its rivals: cost advantage and differentiation advantage. Cost advantage

4042-463: The adoption of courses of action and the allocation of resources necessary for carrying out these goals." Strategies are established to set direction, focus effort, define or clarify the organization, and provide consistency or guidance in response to the environment. Strategic management involves the related concepts of strategic planning and strategic thinking . Strategic planning is analytical in nature and refers to formalized procedures to produce

4136-454: The argument for achieving higher market share and economies of scale . Porter wrote in 1980 that companies have to make choices about their scope and the type of competitive advantage they seek to achieve, whether lower cost or differentiation. The idea of strategy targeting particular industries and customers (i.e., competitive positions) with a differentiated offering was a departure from the experience-curve influenced strategy paradigm, which

4230-400: The book which later went onto become a bestseller also focuses on value chain concept. Porter introduced the concept of value chain analysis in his 1985 book, Competitive Advantage: Creating and Sustaining Superior Performance . The value chain comprises each of the activities, from design through distribution, that a company performs to produce a product; these activities are viewed as

4324-400: The book which later went onto become a bestseller also focuses on value chain concept. Porter introduced the concept of value chain analysis in his 1985 book, Competitive Advantage: Creating and Sustaining Superior Performance . The value chain comprises each of the activities, from design through distribution, that a company performs to produce a product; these activities are viewed as

4418-412: The business is often referred to as "operations management" or specific terms for key departments or functions, such as "logistics management" or " marketing management ," which take over once strategic management decisions are implemented. Strategy has been practiced whenever an advantage was gained by planning the sequence and timing of the deployment of resources while simultaneously taking into account

4512-536: The business. Porter defined two types of competitive advantage : lower cost or differentiation relative to its rivals. Achieving competitive advantage results from a firm's ability to cope with the five forces better than its rivals. Porter wrote: "[A]chieving competitive advantage requires a firm to make a choice...about the type of competitive advantage it seeks to attain and the scope within which it will attain it." He also wrote: "The two basic types of competitive advantage [differentiation and lower cost] combined with

4606-597: The concept of "parenting advantage" to be applied at the corporate level, as a parallel to the concept of "competitive advantage" applied at the business level. Parent companies, they argued, should aim to "add more value" to their portfolio of businesses than rivals. If they succeed, they have a parenting advantage. The right level of diversification depends, therefore, on the ability of the parent company to add value in comparison to others. Different parent companies with different skills should expect to have different portfolios. See Corporate Level Strategy 1995 and Strategy for

4700-414: The configuration or transformation school, a hybrid of the other schools organized into stages, organizational life cycles, or "episodes". Michael Porter defined strategy in 1980 as the "...broad formula for how a business is going to compete, what its goals should be, and what policies will be needed to carry out those goals" and the "...combination of the ends (goals) for which the firm is striving and

4794-451: The corporate consciousness." Prior to the 1960s, the word competition rarely appeared in the most prominent management literature; U.S. companies then faced considerably less competition and did not focus on performance relative to peers. Further, the experience curve provided a basis for the retail sale of business ideas, helping drive the management consulting industry. Completion of an importance-performance matrix forms "a crucial stage in

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4888-500: The data and analyses used as inputs for strategic thinking, which synthesizes the data resulting in the strategy. Strategic planning may also refer to control mechanisms used to implement the strategy once it is determined. In other words, strategic planning happens around the strategic thinking or strategy making activity. Strategic management is often described as involving two major processes: formulation and implementation of strategy. While described sequentially below, in practice

4982-560: The economic development of regions and countries, and the differences in economic outcomes and competitiveness across different regions. Porter said in an interview that he first became interested in competition through sports. He was on the NCAA championship golf squad at Princeton and also played football, baseball and basketball growing up. Porter received a BSE with high honors in aerospace and mechanical engineering from Princeton University in 1969, where he graduated first in his class and

5076-513: The economic development of regions and countries, and the differences in economic outcomes and competitiveness across different regions. Porter said in an interview that he first became interested in competition through sports. He was on the NCAA championship golf squad at Princeton and also played football, baseball and basketball growing up. Porter received a BSE with high honors in aerospace and mechanical engineering from Princeton University in 1969, where he graduated first in his class and

5170-418: The environmental assessment and are responses to strategic questions about how the organization will compete, such as: The answers to these and many other strategic questions result in the organization's strategy and a series of specific short-term and long-term goals or objectives and related measures. The second major process of strategic management is implementation , which involves decisions regarding how

5264-512: The first responsibility of top management is to ask the question 'what is our business?' and to make sure it is carefully studied and correctly answered." He wrote that the answer was determined by the customer. He recommended eight areas where objectives should be set, such as market standing, innovation, productivity, physical and financial resources, worker performance and attitude, profitability, manager performance and development, and public responsibility. In 1957, Philip Selznick initially used

5358-508: The formulation of operations strategy", and may be considered a "simple, yet useful, method for simultaneously considering both the importance and performance dimensions when evaluating or defining strategy". Notes on this subject from the Department of Engineering at the University of Cambridge suggest that a binary matrix may be used "but may be found too crude", and nine point scales on both

5452-486: The framework via a 1963 conference and it remains commonly used in practice. The experience curve was developed by the Boston Consulting Group in 1966. It reflects a hypothesis that total per unit costs decline systematically by as much as 15–25% every time cumulative production (i.e., "experience") doubles. It has been empirically confirmed by some firms at various points in their history. Costs decline due to

5546-439: The importance and performance axes are recommended. An importance scale could be labelled from "the main thrust of competitiveness" to "never considered by customers and never likely to do so", and performance can be segmented into "better than", "the same as", and "worse than" the company's competitors. The highest urgency would than be directed to the most important areas where performance is poorer than competitors. The technique

5640-447: The industry. These forces affect the organization's ability to raise its prices as well as the costs of inputs (such as raw materials) for its processes. The five forces framework helps describe how a firm can use these forces to obtain a sustainable competitive advantage , either lower cost or differentiation. Companies can maximize their profitability by competing in industries with favorable structure. Competitors can take steps to grow

5734-511: The issue of the appropriate level of diversification . In 1987, he argued that corporate strategy involves two questions: 1) What business should the corporation be in? and 2) How should the corporate office manage its business units? He mentioned four concepts of corporate strategy each of which suggest a certain type of portfolio and a certain role for the corporate office; the latter three can be used together: Building on Porter's ideas, Michael Goold, Andrew Campbell and Marcus Alexander developed

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5828-435: The key dimensions considered (industry attractiveness and competitive position) remain central to strategy. In response to the evident problems of "over diversification", C. K. Prahalad and Gary Hamel suggested that companies should build portfolios of businesses around shared technical or operating competencies, and should develop structures and processes to enhance their core competencies . Michael Porter also addressed

5922-468: The key strategic agenda items in Porter's Value-Based Health Care Delivery framework by working with patients and leading healthcare providers to create a global standard for measuring health outcomes. He also currently serves on the Board of Trustees of Princeton University . An analysis by Porter in collaboration with Katherine Gehl frames the US two-party system as a duopoly , a business best described as

6016-420: The key strategic agenda items in Porter's Value-Based Health Care Delivery framework by working with patients and leading healthcare providers to create a global standard for measuring health outcomes. He also currently serves on the Board of Trustees of Princeton University . An analysis by Porter in collaboration with Katherine Gehl frames the US two-party system as a duopoly , a business best described as

6110-696: The main elements of strategic management theory where consensus generally existed as of the 1970s, writing that strategic management: Chaffee further wrote that research up to that point covered three models of strategy, which were not mutually exclusive: The progress of strategy since 1960 can be charted by a variety of frameworks and concepts introduced by management consultants and academics. These reflect an increased focus on cost, competition and customers. These "3 Cs" were illuminated by much more robust empirical analysis at ever-more granular levels of detail, as industries and organizations were disaggregated into business units, activities, processes, and individuals in

6204-474: The most influential business strategists. His work has been recognized by governments, non-governmental organizations and universities. Michael Porter's father was a civil engineer and Georgia Tech graduate who had also gone on to a career as an army officer. During Porter's childhood, his family moved around the United States, and to France and Canada. This contributed to Porter's interest in understanding

6298-418: The most influential business strategists. His work has been recognized by governments, non-governmental organizations and universities. Michael Porter's father was a civil engineer and Georgia Tech graduate who had also gone on to a career as an army officer. During Porter's childhood, his family moved around the United States, and to France and Canada. This contributed to Porter's interest in understanding

6392-421: The national and regional environment supports that productivity. He proposed the "diamond" framework, a mutually-reinforcing system of four factors that determine national advantage: factor conditions; demand conditions; related or supporting industries; and firm strategy, structure and rivalry. Information, incentives, and infrastructure were also key to that productivity. During April 2014, Porter discussed how

6486-421: The national and regional environment supports that productivity. He proposed the "diamond" framework, a mutually-reinforcing system of four factors that determine national advantage: factor conditions; demand conditions; related or supporting industries; and firm strategy, structure and rivalry. Information, incentives, and infrastructure were also key to that productivity. During April 2014, Porter discussed how

6580-477: The opportunities and threats in the business environment. Alfred Chandler recognized the importance of coordinating management activity under an all-encompassing strategy. Interactions between functions were typically handled by managers who relayed information back and forth between departments. Chandler stressed the importance of taking a long-term perspective when looking to the future. In his 1962 ground breaking work Strategy and Structure , Chandler showed that

6674-411: The organization's resources (i.e., people, process and IT systems) will be aligned and mobilized towards the objectives. Implementation results in how the organization's resources are structured (such as by product or service or geography), leadership arrangements, communication, incentives, and monitoring mechanisms to track progress towards objectives, among others. Running the day-to-day operations of

6768-536: The overall profitability of the industry, or to take profit away from other parts of the industry structure. Porter modified Chandler's dictum about structure following strategy by introducing a second level of structure: while organizational structure follows strategy, it in turn follows industry structure. Porter wrote in 1980 that strategy target either cost leadership , differentiation , or focus. These are known as Porter's three generic strategies and can be applied to any size or form of business. Porter claimed that

6862-498: The presidents of Rwanda and South Korea. In 1983, Porter co-founded the Monitor Group , a strategy-consulting firm acquired by Deloitte Consulting in 2013 through a structured bankruptcy proceeding . Michael Porter has founded four major non-profit organizations : Initiative for a Competitive Inner City – ICIC, founded in 1994, and which he still chairs, which addresses economic development in distressed urban communities;

6956-443: The presidents of Rwanda and South Korea. In 1983, Porter co-founded the Monitor Group , a strategy-consulting firm acquired by Deloitte Consulting in 2013 through a structured bankruptcy proceeding . Michael Porter has founded four major non-profit organizations : Initiative for a Competitive Inner City – ICIC, founded in 1994, and which he still chairs, which addresses economic development in distressed urban communities;

7050-639: The probable capabilities and behavior of competition. In 1988, Henry Mintzberg described the many different definitions and perspectives on strategy reflected in both academic research and in practice. He examined the strategic process and concluded it was much more fluid and unpredictable than people had thought. Because of this, he could not point to one process that could be called strategic planning . Instead Mintzberg concludes that there are five types of strategies: In 1998, Mintzberg developed these five types of management strategy into 10 "schools of thought" and grouped them into three categories. The first group

7144-415: The same name by Levitt. Over time, the customer became the driving force behind all strategic business decisions. This marketing concept, in the decades since its introduction, has been reformulated and repackaged under names including market orientation, customer orientation, customer intimacy, customer focus, customer-driven and market focus. In 1985, Ellen Earle Chaffee summarized what she thought were

7238-425: The scope of activities for which a firm seeks to achieve them lead to three generic strategies for achieving above average performance in an industry: cost leadership, differentiation and focus. The focus strategy has two variants, cost focus and differentiation focus." The concept of choice was a different perspective on strategy, as the 1970s paradigm was the pursuit of market share (size and scale) influenced by

7332-438: The skill of a firm in converting its plans into reality; and the skill of a firm in managing its own internal resistance to change. Bruce Henderson , founder of the Boston Consulting Group , wrote about the concept of the experience curve in 1968, following initial work begun in 1965. The experience curve refers to a hypothesis that unit production costs decline by 20–30% every time cumulative production doubles. This supported

7426-475: The term "distinctive competence" in referring to how the Navy was attempting to differentiate itself from the other services. He also formalized the idea of matching the organization's internal factors with external environmental circumstances. This core idea was developed further by Kenneth R. Andrews in 1963 into what we now call SWOT analysis , in which the strengths and weaknesses of the firm are assessed in light of

7520-453: The term "strategy" was primarily used regarding war and politics, not business. Many companies built strategic planning functions to develop and execute the formulation and implementation processes during the 1960s. Peter Drucker was a prolific management theorist and author of dozens of management books, with a career spanning five decades. He addressed fundamental strategic questions in a 1954 book The Practice of Management writing: "...

7614-444: The two processes are iterative and each provides input for the other. Formulation of strategy involves analyzing the environment in which the organization operates, then making a series of strategic decisions about how the organization will compete. Formulation ends with a series of goals or objectives and measures for the organization to pursue. Environmental analysis includes the: Strategic decisions are based on insight from

7708-437: The “basic units of competitive advantage". Porter has focused on addressing pressing problems in health care delivery in the US and other countries. His book, Redefining Health Care (written with Elizabeth Teisberg), develops a new strategic framework for transforming the value delivered by the health care system, with implications for providers, health plans, employers, and government, among other actors. The book received

7802-437: The “basic units of competitive advantage". Porter has focused on addressing pressing problems in health care delivery in the US and other countries. His book, Redefining Health Care (written with Elizabeth Teisberg), develops a new strategic framework for transforming the value delivered by the health care system, with implications for providers, health plans, employers, and government, among other actors. The book received

7896-586: Was appointed Bishop William Lawrence University Professor at Harvard , the university's highest recognition awarded to Harvard faculty. He is a six-time winner of the McKinsey Award for the best Harvard Business Review article of the year. Porter's work has received criticism from peers within academia for inconsistent logical argument in his assertions. Porter's conclusions have been critiqued as "lacking in empirical support" and as "justified with selective case studies". In these analysis of his work it

7990-529: Was appointed Bishop William Lawrence University Professor at Harvard , the university's highest recognition awarded to Harvard faculty. He is a six-time winner of the McKinsey Award for the best Harvard Business Review article of the year. Porter's work has received criticism from peers within academia for inconsistent logical argument in his assertions. Porter's conclusions have been critiqued as "lacking in empirical support" and as "justified with selective case studies". In these analysis of his work it

8084-453: Was elected to Phi Beta Kappa and Tau Beta Pi . He received an MBA with high distinction in 1971 from Harvard Business School (HBS), where he was a George F. Baker Scholar, and a PhD in business economics from Harvard University in 1973. Porter credits Harvard professor Roland "Chris" Christensen with inspiring him and encouraging him to speak up during class. Porter reached the top of his class by his second year at HBS. Porter developed

8178-453: Was elected to Phi Beta Kappa and Tau Beta Pi . He received an MBA with high distinction in 1971 from Harvard Business School (HBS), where he was a George F. Baker Scholar, and a PhD in business economics from Harvard University in 1973. Porter credits Harvard professor Roland "Chris" Christensen with inspiring him and encouraging him to speak up during class. Porter reached the top of his class by his second year at HBS. Porter developed

8272-426: Was focused on larger scale and lower cost. Porter revised the strategy paradigm again in 1985, writing that superior performance of the processes and activities performed by organizations as part of their value chain is the foundation of competitive advantage, thereby outlining a process view of strategy. The direction of strategic research also paralleled a major paradigm shift in how companies competed, specifically

8366-450: Was followed by G.E. multi factoral model , developed by General Electric . Companies continued to diversify as conglomerates until the 1980s, when deregulation and a less restrictive antitrust environment led to the view that a portfolio of operating divisions in different industries was worth more as many independent companies, leading to the breakup of many conglomerates. While the popularity of portfolio theory has waxed and waned,

8460-466: Was influenced under the guidance of Porter, taught American business administration. Porter has served on two public boards of directors, those of Thermo Fisher Scientific and Parametric Technology Corporation . He influence economic policy , working with the Executive Branch and with Congress , and has led national economic-strategy programs in other countries. As of 2009 , he was working with

8554-408: Was influenced under the guidance of Porter, taught American business administration. Porter has served on two public boards of directors, those of Thermo Fisher Scientific and Parametric Technology Corporation . He influence economic policy , working with the Executive Branch and with Congress , and has led national economic-strategy programs in other countries. As of 2009 , he was working with

8648-448: Was one of the founders of the consulting firm The Monitor Group (now part of Deloitte ) and FSG, a social impact consultancy. He is credited with creating Porter's five forces analysis , which is instrumental in business strategy development at present. He is generally regarded as the father of the modern strategy field. He is also regarded as one of the world's most influential thinkers on management and competitiveness as well as one of

8742-448: Was one of the founders of the consulting firm The Monitor Group (now part of Deloitte ) and FSG, a social impact consultancy. He is credited with creating Porter's five forces analysis , which is instrumental in business strategy development at present. He is generally regarded as the father of the modern strategy field. He is also regarded as one of the world's most influential thinkers on management and competitiveness as well as one of

8836-584: Was summarized in the growth–share matrix developed by the Boston Consulting Group around 1970. By 1979, one study estimated that 45% of the Fortune 500 companies were using some variation of the matrix in their strategic planning. This framework helped companies decide where to invest their resources (i.e., in their high market share, high growth businesses) and which businesses to divest (i.e., low market share, low growth businesses.) The growth-share matrix

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