Hello and welcome back to Strategy Friday, the place where i discuss strategies theories for organisations.
Today topic is about the theory developed by professor Micheal Porter from Harvard Business School.
This theory is used widely by organisations as a contrast to the Blue Ocean Strategy.
I will discuss the Blue Ocean Strategy in my future post, but just keep in mind, that Blue Ocean Strategy is more about how to compete than what to compete.
Micheal Porter in his theory goes and analyses the functions of businesses from the Macro level, seeing the forces which influence the marketplace, and went to expand his theory also to Countries.
The main forces influencing business are: Supplier Relations, Buyer Power, Possible Product Substitutes and the Threat of new entry from other businesses, all influencing the competitive marketplace.
A useful picture is provided by Mindtools in their website, in which define the strategic tool and what to analyse.
Classical example of this analysis is used in the airline industry, however, is applicable also to other industries such as the mobile phone industry, where the supplier relations is the whole manufacturing supplier relations, thus for Apple can be the supply of chips from Foxconn, the threat of new entry is high as businesses enter the market developing new products constantly, the buyer power is also very high as, purchase is seen almost as a commodity in which one phone does not vary a lot from others, but to contrast that, Apple has a large brand conscious clientèle and to conclude the competitive landscape, is very competitive, thus having all functioning like a chain in which the gears run very fast.