Michael Porter is still the most important business thinker of our time. He has done a lot of research work on the creation of competitive advantage. The following are some of his works: the five-force model, the diamond model, the four-corner model, the global strategy and the value chain model. The five-force model majorly provides a guide on how to conduct an environmental analysis. The analysis is conducted on factors that would influence an organization’s competitive strength. The diamond model contains analyses of factors and the process through which core competency is created.
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The principal factors in this process are chance, the government, factor condition, demand conditions, related and supporting industries, and organizational strategy and structure. The four-corner model is useful in predicting the competitor’s future strategy by determining the motivation and capabilities. Global strategy is concerned with ways of achieving a competitive advantage in the global market. Lastly, the value chain model guides the companies to attain competitive advantage by suggesting a clear definition of internal processes that is necessary to create and deliver quality products to the customers (Locker, Kaczmarek and Braun 23-156).
This research paper presents analysis of Michael Porter’s works. The main purpose of the research is to identify whether he is the best business thinker of our time. Below are analyses of the five-force model, the diamond model, the four-corner model, the global strategy, and the value chain analysis.
The five-force model
The industry competitors
Under this force, Porter analyzed the behavior of companies within an industry. He concluded that competition is the automatic reaction among rival companies. Competitors have different strategies of presenting products to their target customers. Some companies implement a low-price strategy while others focus more on quality delivery. Competition is intense among rival companies that are equal in size. It could also be intense in an industry that experiences a slower growth rate. In a competitive market, a company can only achieve a competitive advantage over rivals if the strategies adopted are more advanced than those of the competitors. Therefore, this concept has helped organizations succeed by implementing counter strategies that are better than the competitor’s strategy. The application of this concept has created a competitive advantage for various companies. Because it is significant, the concept is still in use up to this date (Porter 10-92).
The diamond model
This model contains analyses of factors that influence the creation of an organization’s core competency. The principal factors in this process are chance, the government, factor condition, demand conditions, related and supporting industries, and organizational strategy and structure. These factors influence the way a business operates. The factor’s aggregate influence creates a competitive advantage or disadvantage for organizations. The main factors comprise land, labor, technology and entrepreneurship. These factors play a critical role in shaping the performance of both the organization and economy.
Sustainable utilization and development of these factors would create a competitive advantage for a country. The level of product demand in the home market influences the level of the organizations’ advancement. The organization’s performance level is greatly influenced by the type of structure and strategies implemented. Porter states that there is a correlation between the company’s structure, strategy and goals. Companies that have adopted this concept have experienced a great deal of competitive advantage. The concept is still being applied by various organizations due to its importance (Porter 21-60).
The four-corner model
This model is another Michael Porter’s work. It is useful in the prediction of a competitor’s strategy. While other models heavily rely on the present plans of a competitor in determining their possible future actions, this model relies on sources of the competitor’s motivation. An accurate identification of the motivation can only be made with knowledge of the competitors’ internal operations. The first corner is motivation. It helps the competitor to predict a possible cause of actions by analyzing the objectives. The second corner is the identification of the competitor’s assumption.
It involves identifying the individual perception of the competitor in terms of strengths and weaknesses. The third corner is the determination of the competitor’s strategy. The fourth corner is the competitor’s capabilities. A company with a stronger financial position is more capable of responding to environmental changes than a financially weaker company. The prediction of the competitor’s future strategy helps a company to formulate a better strategy for competition. The implementation of a better strategy than that of the competitor is a source of competitive advantage. Therefore, the model is still in use because of its importance (Cheverton 153-155).
The global strategy
The global-strategy model, designed by Michael Porter, explains the process that an organization goes through toward globalization. Globalization is the process that unites countries and organizations by facilitating resource sharing. In a global market, the level of competition is intense due to the presence of many rival companies. In a global market, product prices play a key role in determining the extent of the company’s success. Product prices in the international markets are subject to factors such as the inflation, economic condition and the exchange rate of both local and foreign countries. Global strategy demands a formulation of a brilliant pricing strategy. The global strategy is intended to create a competitive advantage to businesses. The organizations that have implemented the strategy are highly competitive in the global market. The first world countries have attained their level of success due to the implementation of this strategy (Cheverton 231-240).
The value chain
Achievement of any goal demands a thorough planning and implementation process. The implementation of courses of action requires a strict activity-sequence plan and resources. Therefore, organizations must have well defined internal processes to facilitate goal achievement. A competitive advantage can be created through the constant delivery of quality products and services to the customers. In order to achieve this, firms should clearly define the process involved in their internal operations. A diligent implementation of the processes also plays a critical part in developing a competitive advantage. The development of organization structure and the creation of separate functional departments are the results of adopting the value-chain concept. This concept has been a major force behind the success of many organizations (Bidgoli 525).
In conclusion, the above-mentioned models and concepts are the result of Michael Porter’s research work. They have been widely adopted by both firms and governments. The models have been the source of core competency for many organizations. New firms that seek to create a competitive advantage are still applying them. Therefore, based on his work, Michael Porter is the most important business thinker of our time (Magretta 13-16).
Bidgoli, Hossein. The Internet Encyclopedia, Hoboken, N.J: John Wiley & Sons, 2003. Print.
Cheverton, Peter. Key Marketing Skills 2: Strategies, Tools and Techniques for Marketing Success, London: Kogan Page, 2004. Internet resource.
Locker, Kitty O, Stephen K. Kaczmarek, and Kathryn Braun. Business Communication: Building Critical Skills, Toronto: McGraw-Hill Ryerson, 2013. Print.
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Magretta, Joan. Understanding Michael Porter: The Essential Guide to Competition and Strategy, Boston, Mass: Harvard Business Review Press, 2012. Print.
Porter, Michael E. On Competition, Boston, MA: Harvard Business School Pub, 2008. Print.