Competitive Positioning Strategies by Michael Porter. Michael Porter and his theory of competitive advantage. Michael Porter's Five Forces Model of Competition. The problem of attracting resources

Michael Porter - Professor of Business Administration Harvard Business school; leading specialist in the field competitive strategy And competition on the international markets. He joined Harvard Business School in 1973 and was the youngest professor in the history of that college. His ideas formed the basis of one of the popular college courses. Along with other top faculty at Harvard Business School, Professor Porter teaches strategy. He is the author of a course for senior executives of large corporations who have recently been appointed and began to fulfill their duties under the new position. Often state organizations and private corporations from around the world invite M. Porter to speak on competitive strategy. M. Porter is the author of 15 books and more than 50 articles. Published in 1980, his book "Competitive Strategy: Techniques for Analyzing Industries and Competitors" is widely recognized as one of the pioneering works in this field. His next two books, "Competitive Advantage: Creating and Sustaining Superior Performance" and "The Competitive Advantage of Nations", published in 1985 and 1990 respectively, offer a new theory developed by him of the competition of nations, states and regions. In his latest research, he returns to where he started - to the strategy of the company.

In the mid 70s. In the 20th century, Harvard Business School professor Michael Porter, later the school's youngest lifetime professor, studied some of the most advanced approaches to competitive strategy at the time and remained dissatisfied. He knew that competitive strategy is a top priority for managers because it raises fundamental questions that all business leaders have to answer, such as: What drives competition in my industry or in the industries in which I intend to expand? What are the likely actions of my competitors and how best to respond to these actions? How will my industry develop? What position can my firm take to compete in the long run?

Despite the importance of these questions, Porter found that the top strategists of the time offered few or no competitive analysis methods that managers could use to answer such questions. Instead of genuinely analytical techniques, the gurus recommended what Porter considered to be weak and primitive models lacking breadth and comprehensiveness. Porter had particular doubts about the value of the most popular growth/market share matrix at the time.

Market Share Industry Growth Rate High Low High Stars Question Marks Low Cash Cows Dogs PARAMETERS - GROWTH RATE OF THE INDUSTRY AND RELATIVE MARKET SHARE.

"STARS" own a large share of fast-growing markets need funding for further development because they are in a strong position in the competition, they high profits and they generate significant cash. provide for their own financial needs if they need funds, they must be provided. Under equal conditions, you cannot pump money out of such units, since this will necessarily harm them.

CASH COWS, are very competitive, have large shares of slow-growing markets, generate significant amounts of money, but have very modest needs.

"QUESTION MARKS" - need huge funds as they need to finance their growth these divisions are unlikely to generate large amounts of capital as they seek market share and do not yet benefit from the savings achieved through manufacturing experience create problems , because in the future, as the market matures, they may become either "stars" or "dogs" forever tormented by money hunger, the model suggests that promising "question marks" should be given a short-term monetary pump and see if they can turn into into the stars if similar enterprises become "dogs", they need an eye and an eye.

"DOGS" operate at a loss and sometimes even turn into financial traps. These include businesses that hold small shares of slow-growth markets with little or no profit they have little or no ability to refocus the “dog” on a small market niche and transform it into a “star” or “cash cow” in a changed market it is unlikely that attempts will not be successful they should be avoided. According to the Boston consultants' model, the best thing to do is not to feed the "dogs" money and let them die. It is even better to sell or liquidate unprofitable enterprises.

WHY IS THE GROWTH/MARKET SHARE MATRIX REALLY USELESS? it is necessary to define the market, and this requires a huge analytical work. The model does not provide any tools for such an analysis. the model assumes that market share is a good indicator of likely cash flows, and growth is an equally good indicator of funding needs. However, neither is as reliable as the model implies. the growth/market share matrix is not very useful for determining the strategy of a particular enterprise. Simplified recommendations - to starve a "dog" to death or grow a "star" from a "question mark" - are far from sufficient to serve as pointers for managers. Managers need to move to an adult analysis of competition.

KEY CONCEPT #1: KEY COMPETITIVE FORCES identifies five core competitive forces, which determine the intensity of competition in any industry. “The goal of competitive strategy for an enterprise operating in an industry is to find a position in the industry in which the company can best protect itself from the action of competitive forces or influence them to its advantage” . 1. The threat of new competitors entering the industry. 2. The ability of your customers to negotiate price cuts. 3. The ability of your suppliers to raise prices for their products. 4. The threat of substitutes for your products and services entering the market. 5. The degree of fierceness of the struggle between existing competitors in the industry.

THE THREAT OF NEW COMPETITORS The first of the forces identified by Porter concerns the ease or difficulty that new competitor that appeared in the industry. The harder it is to enter an industry, the less competition there is and the more likely it is to generate revenue in the long run. Porter identifies seven barriers that make it difficult for new competitors to enter the market: Economies of scale. Product differentiation Need for investment. Switching costs. Access to distribution channels. Costs that arise regardless of the scale of activity. government policy.

SUBSTITUTE PRESSURE Porter's second competitive strength concerns the ease with which a customer can substitute one type of product or service for another.

CUSTOMERS' DIFFERENT ABILITY TO GET PRICE LOWER Buyers are not created equal. Buyers become much more powerful when they: Buy in large quantities, which allows them to demand lower unit prices Have a significant interest in cost savings, since the product they buy is a significant part of their total costs. buy standard products or items that include delivery and service charges face low switching costs have low incomes produce the product they are purchasing are extremely concerned about the quality of the product they are purchasing have complete information

SUPPLIERS' CAPABILITY TO INCREASE PRICES The ability of suppliers to achieve price increases is similar to the ability of buyers to achieve price reductions. According to Porter, suppliers united in associations have significant power in the following cases. When the supplier industry is dominated by a few companies and there is a higher concentration of production than the buyer industry. When suppliers don't have to fight the substitute products their industry sells. When a significant part of the sales of a particular supplier does not depend on a particular buyer. When the supplier's product is unique in some way, or when the buyer's attempts to find a substitute product are associated with high costs and difficulties. When providers create real threat"forward integration"

COMPETITION BETWEEN CURRENT COMPETITORS competition is fiercer in industries dominated by following conditions: Many firms compete in an industry, or competing firms are roughly equal in size and/or resources at their disposal The industry grows slowly Firms have high fixed costs Firms incur high storage costs Firms have to reckon with the time frame during which a product must be sold The product or service is perceived by customers as a commodity that is available in abundance and in different varieties, and the costs of switching a buyer from one product variety to another or from one manufacturer to others are low Capacity has to be built up in leaps and bounds Competitors have different strategies, different backgrounds, different people, etc. High stakes in competition Serious barriers to exiting the industry.

KEY CONCEPT #2: TYPICAL COMPETITION STRATEGIES “Competitive strategy is the defensive or offensive action to achieve a strong position in an industry, to successfully overcome the five competitive forces, and thereby generate higher returns on investment. » You can outperform other firms with just three internally consistent and successful strategies: Cost minimization. Differentiation. Concentration.

COST MINIMIZATION “The position that such a firm occupies in terms of its costs provides it with protection from the rivalry of competitors, since lower costs mean that the firm can earn profits after its competitors have already exhausted their profits in the course of rivalry. Low costs protect the firm from powerful buyers, since buyers can only use their power to drive its prices down to the level of a rival that is as efficient as the firm. Low costs protect the firm from suppliers by providing greater flexibility to counter them as input costs rise. Factors that lead to low costs usually create high barriers to entry of competitors into the industry - these are economies of scale or cost advantages. Finally, low costs usually put the firm in an advantageous position with respect to substitute products. Thus, the low-cost position protects the firm from all five competitive forces, because the struggle for favorable terms of the transaction can reduce its profits only until the profits of its next most efficient competitor are destroyed. Less efficient firms in the face of intensified competition, they will be the first to suffer.

The minimum cost strategy is not suitable for every company. Porter argued that companies wishing to pursue such a strategy must control large market shares relative to competitors or have other advantages, such as the most favorable access to raw materials. Products need to be designed to be easy to manufacture; in addition, it is reasonable to produce a wide range of interconnected products in order to evenly distribute costs and reduce them for each individual product.

DIFFERENTIATION A firm pursuing a differentiation strategy is less concerned about costs and more eager to be seen as something unique within the industry. allows several leaders to exist within the same industry, each of which retains some distinctive feature of its product. Differentiation requires a certain increase in costs: you must have better designed products, you must invest heavily in customer service, and you must be prepared to give up some market share.

RISKS OF DIFFERENTIATION 1. 2. 3. If the price of a product from firms that minimize costs is much lower than that of firms pursuing a differentiation strategy, consumers may prefer the first to what distinguishes a company today, it may not work tomorrow. Yes, and the tastes of buyers are changeable. Competitors following cost minimization strategies are able to quite successfully imitate the products of firms pursuing a differentiation strategy in order to lure consumers and switch them to themselves.

CONCENTRATION A company pursuing such a strategy focuses its efforts on the satisfaction of a particular customer, on a particular range of products, or in a market in a particular geographic region. The main difference between this strategy and the previous two is that a company that chooses a concentration strategy decides to compete only in a narrow market segment. In doing so, it faces the same benefits and losses as the leaders in cost minimization and the companies that produce unique products.

THE DANGER OF BEING STUCK IN THE MIDWAY Porter cautions that it's best to use only one of these approaches. Failure to follow just one of them will leave the company stuck somewhere in between with no coherent, sound strategy. there will be no "market share, investment, and determination to play cost-minimization or differentiation within an industry, necessary to avoid this in a narrower market segment". will lose both customers who buy products in large volumes and require low prices and customers who demand unique products and services. will have low profits, blurry corporate culture, contradictory organizational structures, weak system of motivation, etc.

CONCEPT #3: THE VALUE CREATING JIB “Competitive advantage cannot be understood by looking at the firm as a whole.” strategic analysis and choosing a strategy, Porter suggests turning specifically to the value chain. He identifies five primary and four secondary activities that make up such a chain in any firm.

FIVE PRIMARY ACTIONS 1. 2. 3. 4. 5. Logistical support of the enterprise Manufacturing processes Sales Logistics Marketing and Sales Service.

FOUR SECONDARY ACTIONS 1. 2. 3. 4. Purchasing Technology development Human resource management Maintaining firm infrastructure

Each standard category can and should be broken down into unique actions specific only to this particular company. The purpose of this breakdown is to help companies choose one of three typical strategies. It is necessary to highlight the areas of potential competitive advantage that a company can gain by countering five competitive forces that are unique to each industry and particular company. Such an analysis should be carried out by all company leaders, and this should be done in stages. It is useful for managers to draw diagrams, analyze the value of their costs

CONCLUSION The main reason Porter's ideas didn't work is because some companies simply refused to play by his rules. Many Japanese and some American upstart companies simultaneously minimized costs and differentiated. In Porter's terminology, they were stuck somewhere in the middle, yet not only survived, they thrived, flourished. It became clear to American corporations that Porter's theory no longer corresponded to reality. But, despite everything, Porter made a huge contribution to the development of the economy, for which many say many thanks to him.

Michael Porter Basic Strategies

Harvard professor Michael Porter presented three of his strategies for strengthening a company's competitiveness back in 1980 in his book Competitive Strategy. Since then, Porter's strategies have not lost their relevance at all. Of course, many entrepreneurs believe that they have a fairly general look. But wait, Michael Porter is a professor, a consultant - his task is precisely to collect general methods and present them to the general public. And practical subtleties are a personal matter of every businessman.

Porter described his strategies at a time when the concept of positioning, described by Jack Trout and Al Rice, was just gaining popularity. The main essence of Michael Porter's strategies is that for the successful functioning of the company, it needs to somehow stand out from the competition so as not to be everything for everyone in the eyes of consumers, which, as you know, means nothing for anyone. To cope with this task, the company must choose the right strategy, which it will subsequently adhere to. Professor Porter identifies three types of strategy: cost leadership, differentiation, and focus. At the same time, the latter is divided into two more: focusing on differentiation and focusing on costs. Let's look at each strategy in detail.

Cost Leadership

This strategy is extremely simple. To succeed, a company must reduce costs and become the leader in this indicator in its industry. Usually this type of strategy is clear to absolutely all employees of the company, especially if its activities are related to the production of any goods. But being the most lean company in the industry is no easy task. Firstly, for this you will have to use all the most modern equipment and try to achieve maximum process automation. Accordingly, a company trying to become a cost leader needs as much as possible quality staff, which will do its job both faster and better (while getting more).

In order to have low costs, the company will have to serve a lot of different market segments. This is logical, since the larger the scale of production, the lower the cost of it. This, according to Michael Porter, is the most important aspect of this strategy.

In order to remain the leader in terms of costs all the time, the company will have to constantly look for new opportunities to save money by introducing new technology management, the latest technical developments. In addition, the principles of differentiation cannot be ignored, since there is a possibility that buyers will find the quality of the company's products not worthy of them. And by that, one must understand that low costs are not synonymous with low-quality products, and are not even synonymous with cheap products. No one interferes with proper positioning to sell goods at the same price as competitors. And due to low costs, the company will be able to receive higher profits.

The cost leadership strategy involves constant monitoring of the current situation. This strategy is very dangerous, since there is a high probability that sooner or later there will be competitors who can make their costs even lower. All this is possible, both due to better marketing, and due to such factors as: distribution network, technological progress, know-how in management, external factors in the country and the world, the entry of larger global players into the market, loss of motivation by employees and etc.

One of the main temptations for the leader in terms of costs is the expansion of the product range. But it is worth resorting to it, thinking 10 times, since such an expansion can destroy all cost advantages, thereby ruining the company. Another factor to keep in mind is the consumer. They can be the factor that can force the company to lower prices, which will lead to the destruction of the entire advantage of the leader in terms of costs.

Differentiation

Differentiation used to be based on the concept of uniqueness. trade offer. Now this is no longer the case. In principle, with proper marketing, a company's product may be a typical representative of the industry, but in the minds of consumers, it will be special. Differentiation, precisely, consists in taking a unique place in the minds of consumers, operating on some unique property of the product.

Differentiation, however, can refer not only to the product itself or marketing, but also to the distribution system (for example, Tinkoff bank credit cards can only be obtained through direct mail) and so on. This strategy allows you to create products that will cost end users much more expensive than competitors' products (we are talking about luxury goods). But do not get carried away, when differentiating, it is very important to keep track of finances all the time, since if you manage it incorrectly, it may turn out that the company is sinking.

Among good examples differentiation should be noted in the strategy of 7Up, which presented its drink as “not Cola”. 7Up was a resounding success that would have only grown if the company hadn't, for reasons no one could understand, for some time to abandon its "no cola" strategy and move to "America chooses 7Up." Volkswagen "Beetle" is one of best examples differentiation. This car was introduced at a time when the US was in vogue for big, beautiful and often expensive cars. The Beetle fit none of those definitions and quickly became the best-selling car in the US. True, then followed by failure. This was due to the fact that Volkswagen decided to become everything to everyone by changing its differentiation strategy.

Companies pursuing a differentiation strategy may fall prey to problems such as large cost differentials with an industry leader. This may lead to a situation that the company will become irrelevant, despite all its positioning. Also, it is likely that the company's product will be copied by competitors. In this way, all the differentiating advantage of the company (if it is related to the product) can disappear. Finally, it is worth noting that a company pursuing a differentiation strategy should keep a close eye on costs. The appearance of the Japanese luxury car under the Lexus brand hit the positions of American and European giants such as Cadillac and Mercedes. The Japanese also positioned themselves as a luxury car, but due to lower costs, it was much cheaper than similar Cadillacs.

Focusing

The focus strategy is to select a specific segment in the industry and target it exclusively so that this specific group of buyers will make the company stand out from the competition. Accordingly, the company's task is to look attractive specifically for this segment of customers. Michael Porter divides the focus strategy into two parts. The first is a focus on costs. Moreover, it is associated with focusing on the costs of working with one segment of the industry allocated by the company. Due to lower costs, the company will be able to achieve a high competitive advantage in the eyes of its target group. The second branch of the strategy is to focus on differentiation. The task of the company in this case is to present its product as attractive as possible for a specific target audience. In this case, it is important to choose a narrow target audience (not by quantity), which will differ significantly from the rest of the audience.

The problems with this strategy are that when working with a small target audience a company will have higher costs than one that works for the entire industry. Finally, Michael Porter highlights another important threat - competitors can find a narrow market segment in the segment in which the company operates, thereby seriously complicating its life.

According to Michael Porter, any of these strategies gives the company a competitive advantage. The worst thing is if the company is delayed halfway to choosing a strategy. In this case, it will gradually lose its market share, its costs will grow, which will prevent it from working with large buyers. Also, the company will not be able to catch on to narrow niches and compete with other products that bypassed it through differentiation. When choosing one of Porter's basic strategies, it is very important to understand what the company ultimately wants to achieve. After all, focus and differentiation strategies can even contribute to a serious decrease in income (but not profit). All this leads to the fact that when choosing a strategy for an operating company, a full-fledged reorganization may be necessary, which will inevitably entail layoffs.

The basic strategies of Michael Porter are classics of management and have served as the basis for many current strategies. I hope this article was useful for you as well.

“The purpose of a competitive strategy for an enterprise is to position itself in such a way that the company can best defend itself against

competitive forces or influence them to your advantage. Michael Porter

Porter's first key concept identifies five major competitive forces that,

in his opinion, determine the intensity of competition in any industry.

Five Competitive Forces look like this:

The threat of new competitors entering the industry.

The ability of your customers to negotiate price reductions.

The ability of your suppliers to secure higher prices for their products.

The threat of substitutes for your products and services entering the market.

The degree of fierceness of the struggle between existing competitors in the industry.

Typical competitive strategies according to Michael Porter

“Competitive strategy is a defensive or offensive action aimed at achieving a strong position in the industry, successfully overcoming the five competitive forces and thereby obtaining higher returns on investment.” Michael Porter.

Porter acknowledges that companies have demonstrated many different ways to achieve a goal, but he insists that the only way to outperform other firms is through three internally consistent and successful strategies:

Cost minimization.

Differentiation.

Concentration.

First typical strategy: cost minimization

In some companies, managers pay great attention to cost control. Although they do not neglect quality, service and other necessary things, the main strategy of these companies is to reduce costs compared to those of competitors in the industry. Low costs protect these companies from the five competitive forces.

Once a company becomes a cost leader, it is able to maintain a high level of profitability, and if it wisely reinvests its profits in equipment upgrades, it can hold the lead for some time.

Cost leadership can be an effective response to competitive forces, but it provides no guarantee against defeat.

Second Typical Strategy: Differentiation

As an alternative to cost leadership, Porter proposes product differentiation, i.e. differentiating it from the rest in the industry. A firm pursuing a differentiation strategy is less concerned about costs and more eager to be seen as something unique within the industry.

For example, Caterpillar emphasizes the durability of its tractors, the availability of service and spare parts, and an excellent dealer network to stand out from the competition.

The differentiation strategy allows several leaders to exist within the same industry, each of which retains some distinctive feature of its product.

At the same time, differentiation carries with it certain risks, as does the strategy of leadership in minimizing costs. Competitors pursuing cost minimization strategies are able to imitate the products of firms pursuing a differentiation strategy quite well in order to lure consumers and switch them to themselves.

The third typical strategy: concentration

The last sample strategy is the concentration strategy.

A company pursuing such a strategy focuses its efforts on the satisfaction of a particular customer, on a particular range of products, or in a market in a particular geographic region.

While cost minimization and differentiation strategies aim to achieve industry-wide goals, a total focus strategy is built around serving a particular customer very well.

The main difference between this strategy and the previous two is that a company that chooses a concentration strategy decides to compete only in a narrow market segment. Instead of attracting all customers by offering them either cheap or unique products and services, a concentration strategy company caters to a specific type of customer.

Operating in a narrow market, such a company may attempt to become a leader in minimizing costs or pursue a strategy of differentiation in its segment. In doing so, it faces the same benefits and losses as cost leaders and unique product companies.

“The purpose of a competitive strategy for an enterprise is to position itself in such a way that the company can best defend itself against

competitive forces or influence them to your advantage. Michael Porter

Porter's first key concept identifies five major competitive forces that,

in his opinion, determine the intensity of competition in any industry.

Five Competitive Forces look like this:

The threat of new competitors entering the industry.

The ability of your customers to negotiate price reductions.

The ability of your suppliers to secure higher prices for their products.

The threat of substitutes for your products and services entering the market.

The degree of fierceness of the struggle between existing competitors in the industry.

Typical competitive strategies according to Michael Porter

Cost minimization.

Differentiation.

Concentration.

First Typical Strategy: Cost Minimization

Once a company becomes a cost leader, it is able to maintain a high level of profitability, and if it wisely reinvests its profits in equipment upgrades, it can hold the lead for some time.

Cost leadership can be an effective response to competitive forces, but it provides no guarantee against defeat.

Second Typical Strategy: Differentiation

For example, Caterpillar emphasizes the durability of its tractors, the availability of service and spare parts, and an excellent dealer network to stand out from the competition.

The differentiation strategy allows several leaders to exist within the same industry, each of which retains some distinctive feature of its product.

The third typical strategy: concentration

The last sample strategy is the concentration strategy.

A company pursuing such a strategy focuses its efforts on the satisfaction of a particular customer, on a particular range of products, or in a market in a particular geographic region.

While cost minimization and differentiation strategies aim to achieve industry-wide goals, a total focus strategy is built around serving a particular customer very well.

Michael Porter was born on May 23, 1947 in Michigan to the family of an American army officer. He graduated from Princeton University, then received an MBA and a Ph.D. from Harvard University, completing each stage of his studies with honors. From 1973 to the present he has been working at the Harvard Business School, since 1981 - as a professor. Lives in Brooklyn, Massachusetts.

Throughout his scientific career, M. Porter has been studying competition. He has been a consultant to many leading companies such as T&T, DuPont, Procter&Gmble and Royl Dutch/Shell, rendered services to the directorate lph-Bet Technologies, Prmetric Technology Corp., R&B Flcon Corp. And ThermoQuest Corp. In addition, Porter has served as a consultant and advisor to the governments of India, New Zealand, Canada and Portugal, and is currently the lead regional strategy development specialist for the presidents of several Central American countries.

Being one of the most influential specialists in the field of management, Porter largely determined the main directions of competition research (primarily in a global context), proposed models and methods for such research. He managed to link the development of enterprise strategy and applied microeconomics, which were previously considered independently of each other.

He has written 17 books and over 60 articles. Among the most famous: "Competitive strategy: a methodology for analyzing industries and competitors" ( Competitive Strtegy: Techniques for nlyzing Competitors) (1980), "Competitive advantage: how to achieve a high result and ensure its sustainability" ( Competitive dvntge: Creting nd Sustining Superior Performance) (1985) and Competitive Advantages of Countries ( Competitive dvntge of Ntions) (1990).

In his main book, Competitive Strategy, Porter proposed revolutionary approaches to developing the strategy of an enterprise and individual sectors of the economy. This book is based on a thorough study of hundreds of companies in various business areas. According to Porter, the development of a competitive strategy comes down to a clear statement of what the goals of the enterprise should be, what means and actions will be needed to achieve these goals, and what methods the company will compete with. When talking about strategy, managers and consultants often use different terminology. Some speak of "mission" or "task" when referring to "goal"; others speak of "tactics" when referring to "current operations" or "productive activities." However, in any terms the main condition in the development of a competitive strategy is the distinction between goals and means.

On the figure 1 competitive strategy is presented in the form of a diagram called by Porter "The Wheel of Competitive Strategy":

wheel axle is goals companies including general definition its competitive intentions, specific economic and non-economic objectives, the results it plans to achieve;
wheel spokes are facilities(methods) by which the company seeks to achieve its main goals, key areas of business policy.

For each item of the scheme, briefly define key points business policy (depending on the nature of the business, the wording may be more or less specific). Together, goals and directions represent the concept of strategy, which acts as a guide for the company, determining its development and behavior in the market. As in a wheel, the spokes (methods) emanate from the center (goals) and are connected to each other; otherwise the wheel will not roll.

IN general view the development of a competitive strategy is associated with the consideration of key factors that determine the boundaries of the organization's capabilities ( rice. 2). The advantages and weaknesses of the company - in the structure of its assets and competencies compared to competitors, including financial resources, technological state, brand recognition, etc. The individual values of the organization include the motivation and demands of both top managers and other company employees who implement the chosen strategy. Advantages and weaknesses combined with individual values determine the internal constraints on the choice of strategy.

It is equally important when developing a competitive strategy to take into account factors external to the company, given by its environment. The concept of "environment" is understood by Porter very broadly, it includes the action of both economic and social forces. key element external environment The company is the industry (s) in which it competes: the structure of the industry largely determines the rules of the game, as well as the acceptable options for competitive strategies. Since external factors tend to affect all firms in an industry simultaneously, taking into account forces outside the industry is relatively less important in developing a successful competitive strategy, more important than the ability of a particular company to interact with these forces.

The intensity of competition in the industry is far from accidental. It is defined economic structure industry, rather than subjective factors (for example, luck or the behavior of existing competitors). According to Porter, the state of competition in an industry depends on the action of five major competitive forces (rice. 3). The combined effect of these forces determines the industry's ultimate profitability potential, measured as a long-term measure of return on investment. Industries differ significantly in their potential for profitability because the competitive forces operating within them are different. With their intense impact (for example, in industries such as manufacturing car tires, paper industry, iron and steel) companies do not receive impressive profits. With a relatively moderate impact, high profits are common (in the production of equipment for oil production, cosmetics and toiletries; in the service sector).

Michael Porter proposed a revolutionary approach to the development of enterprise strategy - using the laws of microeconomics. He began to consider strategy as a basic principle that can be applied not only to individual companies, but also to entire sectors of the economy. Analysis of strategic requirements in various industries allowed the researcher to develop five forces model (rice. 3), taking into account the action of five competitive factors:

The emergence of new competitors. Competitors inevitably bring new resources, which requires other market participants to attract additional funds; accordingly, the profit decreases.
The threat of substitutes. The presence in the market of competitive analogues of products or services forces companies to limit prices, which reduces revenue and reduces profitability.
The ability of buyers to defend their own interests. This entails additional costs.
The ability of suppliers to defend their own interests. Leads to higher costs and higher prices.
Rivalry between existing companies. Competition requires additional investment in marketing, research, new product development, or price changes, which also reduces profitability.

The influence of each of these forces varies from industry to industry, but together they determine the profitability of a company in the long run.

Porter suggests three basic strategies: absolute leadership in costs; differentiation; focusing. By using these strategies, companies will be able to counteract competitive forces and achieve success. For effective implementation the chosen basic strategy is necessary: the development of targeted strategic plans(organizational measures), coordination of actions of all divisions of the company, well-coordinated work of the team. Based on the basic strategy, each company develops its own version of the strategy. The achievement by particular companies of superior performance relative to competitors in some industries can lead to an overall increase in profitability for all. In other industries, the very possibility of a company receiving an acceptable profit depends on the success of the implementation of a competitive strategy.

Porter makes it clear that there is no single “best” strategy in any industry: different companies use different strategies, and the same five competitive forces operate in every industry, albeit in different combinations.

Another significant contribution of Michael Porter to management theory is the development value chain concepts. It takes into account all the actions of the company, leading to an increase in the value of a product or service. The researcher highlights main activities related to the production of goods and their delivery to the consumer, and auxiliary , which either directly contribute to an increase in value (as, for example, technological development) or allow the company to operate more efficiently (by creating new lines of business, new procedures, new technologies or new inputs). Understanding the value chain is extremely important: it allows you to understand that the company is more than a set of different types activities, since all activities in the organization are interconnected. In order to ensure the achievement of competitive goals and successfully respond to external influences from the industry, the company must decide which of these activities should be optimized, what trade-offs are possible.

In his work "Competitive Advantages" Porter moved from analyzing the phenomenon of competition to considering the problem of creating strong competitive advantage. Later, he concentrated his efforts on applying the developed principles of competitive strategy analysis on a global scale.

In Competing in Global Industries (1986), Porter and colleagues applied these principles to companies operating in international markets. Based on results industry analysis, Porter singled out two types of international competition. According to his classification, there are multi-internal industries in which there is internal competition in each individual country (for example, private banking), and global industries. A global industry is “an industry in which a firm's competitive position in one country largely depends on its position in other countries, and vice versa” (for example, automotive and semiconductor manufacturing). According to Porter, the key difference between the two types of industries is that international competition in multi-domestic industries is optional (companies can decide whether or not to compete in foreign markets), while competition in global industries is inevitable.

International competition is characterized by the distribution of activities that form a value chain among several countries. Therefore, in addition to choosing the space for competition and the type of competitive advantage, companies should develop their strategy options also taking into account the characteristics included in the value chain of activities:

geography of distribution and concentration (where they are carried out);
coordination (how closely they are related to each other).

There are four possible combinations of these factors:

High concentration - high coordination (simple global strategy: all activities are carried out in one region/country and are highly centralized).
High concentration - low coordination (a strategy based on export and decentralization of marketing activities).
Low concentration - high coordination (strategy of large-scale foreign investment in geographically dispersed, but well-coordinated operations).
Low concentration - low coordination (strategy targeting countries where decentralized subsidiaries focus on their own markets).

When competing in international markets, there is also no single correct, “best” strategy for companies. Each time the strategy is chosen depending on the nature of competition in the industry and the five main competitive forces. Porter points out that there may be cases where there is a "scattering" of some activities that define the value chain, and a "concentration" of others. It is important to remember that competitive advantage is determined primarily by how some type of activity is carried out, and not where .

In the book Competitive Advantages of Countries (1990), Porter deepens his analysis of the phenomenon of competition: he reveals determinants that determine the action of competitive forces at the national level:

working conditions (the presence in the country of such factors necessary for the production of products as qualified work force or industrial infrastructure);
demand conditions (features of the market for a particular product or service);
presence of supporting or related industries (internationally competitive suppliers or distributors);
the nature of the company's strategy (features of competition with other companies, including factors such as the organizational and management climate, as well as the level and nature of internal competition).

The influence of these determinants can be found in every country and in every industry. They define the forces of competition within industries: "The determinants of national advantage reinforce each other and grow over time, favoring an increase in competitive advantage in an industry." The emergence of such a competitive advantage often leads to an increase in concentration both in individual industries (engineering in Germany, the electronics industry in Japan) and in geographical areas (in northern Italy, in the Rhine regions in Bavaria).

Porter emphasizes the importance of national competitive advantage often occurs under the influence initially unfavorable conditions when nations or industries are forced to actively respond to a challenge. “Individual factor deficiencies, powerful local buyers, early market saturation, skilled international suppliers, and intense domestic rivalry can be critical conditions for creating and maintaining advantage. Pressure and adversity are powerful drivers of change and innovation.” When new industrial forces try to change the existing order, nations experience ups and downs in terms of having a competitive advantage. The author makes an optimistic forecast: “In the end, nations will succeed in certain industries, as their internal environment is the most dynamic and most active, and also stimulates and pushes companies to increase and expand their advantages.

The significance of Porter's contribution to management theory is not disputed by anyone. At the same time, some of the shortcomings of his work caused a number of fair criticisms. For example, the distinction he introduced between multi-domestic and global industries may disappear when demands for free trade and growing exports bring elements of international competition into the domestic markets of virtually all industries.

The main advantage and attraction of Porter's models is their simplicity. He encourages readers to use the proposed models as starting points for their own analysis of the relationships between various elements. These models give extremely flexibility to choose the direction of movement, develop a strategy (especially international).

Michael Porter suggested effective methods to analyze the phenomenon of competition and to develop a company strategy (both domestic and international markets). He demonstrated the benefits of collaborative exploration of strategic and economic challenges, thus making an important contribution to the development of understanding of strategy and competition.

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