Reflecting on Michael? Potter series 1: Michael? The Contribution and Limitation of Porter's Competition Theory

Reflecting on Michael? Potter series 1: Michael? The Contribution and Limitation of Porter's Competition Theory

order

The current Michael? There are many researches on Porter's competition theory, but most of them have the following two problems.

1, lack of development vision to see the problem, you can't see that any theory is produced in a certain time-space social background. If we further summarize the theory as a universal truth theory, we must re-examine the time-space boundary of the theory.

2. Lack of dialectical attitude towards problems. The basic rules of business competition are universal, but they are also national.

In short, every era has a different business environment, and the strategic key elements of every era are changing. Invariably, enterprise value should be reinterpreted and defined in every era and implemented systematically. This is the whole meaning and process of strategy.

First, the background of competition theory.

1, business theory background

Business theory originated in the United States in the 1920s and developed with the development of American economy. From the 1920s to 1950s, commercial development was basically in the seller's market, and commercial practice mainly considered how to meet environmental changes and market demand. The theory of enterprise strategy is in the stage of classical theory, and the classical business theory belongs to the paradigm of enterprise-environment comprehensive analysis. Its basic viewpoints, theoretical tools and representative figures are summarized as follows.

1. 1, the core view at this stage

(1), the strategic basic point is that the enterprise adapts to the change of environment.

(2) The strategic goal is to gain market expansion.

(3) The strategic means is resource allocation.

(4) Strategic reassurance is an organizational structure adaptation strategy.

1.2, the main theoretical tool

Market positioning theory

Product market matrix

Matrix of Boston Consulting Group

Ge jiufang, SWOT analysis

1.3, for:

Andrews Ansoff

2, the new reality of enterprise practice

In the 1960s, the biggest change of European and American enterprises was that the seller's market gradually changed into the buyer's market, the international market gradually opened, the tariff barriers gradually broke down, and most large enterprises diversified their operations through mergers and acquisitions (although the failure rate of mergers and acquisitions was nearly 50%). In this case, enterprises are not satisfied with the annual budget, and begin to adopt operational research and improved forecasting technology for planning, which is the rise of strategic planning school.

In the 1970s and 1980s, in the United States, represented by the 1973 oil crisis, the economic environment of enterprises changed suddenly, the competition in science and technology became increasingly fierce, and corporate mergers increased. At the same time, facing the challenges from Japan and Europe, global competition has intensified. With the acceleration of the pace of environmental change, people are more and more aware that the future is unpredictable and the environment is uncertain and discontinuous, which fundamentally shakes the idea that the future can be planned and predicted in strategic planning.

3. The new contradiction between theory and practice

Under the premise of commercial practice in buyer's market, the original paradigm of comprehensive analysis of enterprises and environment mostly focuses on organizing and systematically raising long-term concerns of managers, rather than solving problems. They either only analyze a diversified company without starting from the industrial point of view, or only consider one aspect of the industrial structure. Obviously, it is impossible to propose a solution about how enterprises compete.

Second, the main contribution of competition theory

1, the transformation of enterprise strategic objectives: from adaptation to competition

Chandler, the representative of classical enterprise strategy theory, analyzed the relationship among enterprise environment, enterprise strategy and enterprise organizational structure in his book Strategy and Structure. He believes that enterprises can only survive and develop under certain objective environment. Therefore, the development of enterprises should adapt to the changes of the environment and formulate corresponding strategies and goals on the basis of analyzing the environment.

Michael. Porter said in the preface of the book "Competitive Strategy", "Competitive strategy is a major area that managers are most concerned about, and managers' understanding of the industry and competitors determines the formation of competitive strategy. However, there are almost no ready-made analytical tools in the strategic field to help managers understand the industry and competitors, and the existing research lacks depth and breadth. " "I have been engaged in teaching and research at Harvard Business School, and my research field spans corporate strategy and industrial economics. I tried to fill this gap. "

2. The change of enterprise strategic analysis object: from enterprise to industry.

197 1 year, in his concept of enterprise strategy, Andrews, an enterprise strategist, thinks that the formation process of strategy is actually the process of matching the internal conditions of the enterprise with the external environment, which can coordinate the advantages and disadvantages of the enterprise with the external opportunities and threats.

Classical enterprise strategists believe that the practice of enterprise strategy must be the responsibility of senior leaders, and the formation of strategy should be a well-designed process, neither an intuitive thinking process nor a standardized analysis process, and the strategy should be clear, concise and easy to understand and implement. The design school divides strategic management into two stages: strategic formation and strategic implementation, which separates the dynamic relationship between them.

Michael. Porter first shifted the focus of strategic analysis from enterprise to industry, emphasizing the influence of industry characteristics and structural factors on the return on investment of enterprises, and provided five competitiveness models (suppliers, buyers, current competitors, substitute product manufacturers and potential entrants to the industry). A series of analytical skills, such as industry attraction matrix and value chain analysis, help enterprises choose industries and formulate competitive strategies that meet the characteristics of industries.

3. Refinement of enterprise strategic analysis tools: from framework to structure.

3. 1, Michael? Before Porter, most analytical tools of enterprise strategy belonged to analytical framework. Take Ansoff matrix as an example.

1956 Ansoff published relevant articles in Harvard Business Review, and put forward the concept of product matching with market. He believes that the essence of enterprise management strategy is composed of four factors: existing products, future products, existing markets and future markets, which has become the prototype of the famous Ansoff matrix.

In addition, SWOT analysis matrix has similar characteristics.

3.2. Five competitive forces model ("five competitive forces")-a structured method to analyze the industry environment.

His own analytical skills and framework not only help a company to analyze the whole industry, predict its future evolution, understand its competitors and its own positioning, but also help to turn this analysis and understanding into a competitive strategy and implement it according to the specific enterprise situation.

Porter summed up five kinds of competitiveness in his book: the bargaining power of suppliers, the bargaining power of buyers, the threat of new entrants (the threat of new entrants), the threat of substitutes (the threat of substitute products) and the confrontation with competitors in the same industry. This is the famous "five-force model".

This model framework lists five core factors that can determine a company's profitability and possible competitive space in an industry. It centers on the competition among manufacturers, and other "forces" around this factor determine the intensity of competition.

4. Explore the basic strategy of enterprise strategy: from disorder to standardization.

Before Porter, there was no "standardized" enterprise competitive strategy model.

Michael Porter summed up the famous "Five Forces Model" in "Analysis of Competitive Strategy Skills of Industries and Competitors" published by 1980. And put forward three effective strategies, namely, cost advantage strategy, differentiation strategy and gap market strategy.

1), the overall cost is leading.

1. 1), strategic points

(1), low-cost production of standardized products for price-sensitive customers.

(2) The company should ensure that the total cost of all its value chains is lower than that of its competitors.

1.2), suitable for the market.

Mass undifferentiated market

Mass differentiated market

1.3), suitable for enterprises.

Large manufacturing enterprises

Large manufacturing, transportation, retail and other enterprises

2), differentiation strategy (difference)

2. 1), strategic points

(1), diversified customer needs;

(2) Customers have obvious differentiated perception of products (services) and are willing to pay for it;

(3) It is difficult for competitors to copy or the cost of copying is high.

2.2), suitable for the market.

Large (middle) market with diversified demand

2.3), applicable to enterprises.

All enterprises

3), centralized strategy (focus)

3. 1), strategic points

(1), the industry has sufficient scale and growth potential.

(2) Consumers have special preferences or needs.

(3) Competitors did not attempt to specialize in the same market.

3.2), suitable for the market.

Aim at the small market

3.3), suitable for enterprises

Invisible champion enterprise in the industry

The content of an enterprise's basic competitive strategy can be systematic, as shown in the following figure.

Third, the limitations of competition theory

Michael Porter's competitive strategy thought based on industrial analysis, which originated from 1980, can be regarded as the development of early industrial organization theory and the deepening of environmental adaptation theory. The assumption is that industrial structure is the decisive factor of enterprise profits.

(A), the limitations of the competitive point of view itself

1. Basic viewpoints of Porter's competition theory:

(1), only those enterprises that have developed or acquired the internal skills required by the strategy determined by the external environment are likely to succeed, otherwise they may fail.

(2) The high profit of an enterprise is determined by the characteristics of the external environment, not by the unique resources and capabilities within the enterprise.

Objectively speaking, Porter's competition theory bases competition on external factors rather than internal factors, which is a "sufficient condition" rather than a "necessary condition" for success. This gap was filled by the later core competence school.

2. Represented by the article "Enterprise Core Competence" written by C.K.Prahalad and Hamel, the author puts forward an opposite but equally effective view. Its basic views are as follows:

(1), modern market competition is not so much competition based on products as competition based on core competence.

This school believes that the so-called core competence is the most core and fundamental part of all abilities, which can radiate outward, act on other abilities and affect the play and effect of other abilities.

(2) The goal of enterprise strategy is to identify and develop the core competence that competitors can't imitate. Only with this core competence can enterprises quickly adapt to the changes in the market, meet the needs of customers, and distinguish enterprises from Asia and competition.

(3) In order to obtain and maintain a sustainable competitive advantage, enterprises must participate in the competition at three levels: core competence, core products and final products. On the level of core competence, the self-standard of enterprises should be to establish a leading position in the special design and development of product performance to ensure the unique advantages of enterprises in product manufacturing and sales.

(4) Ability is the key skill and tacit knowledge owned by enterprises, the intellectual capital owned by enterprises and the source of decision-making and innovation.

(5) Ability determines the scale and boundary of an enterprise, and also determines the breadth and depth of its diversification strategy and transnational operation strategy.

(6) Core competence comes from collective learning within the organization. From the transmission of experience norms and values, from the mutual exchange and participation of organization members.

(7) An enterprise is a capability system or a collection of capabilities.

(B) the limitations of theoretical assumptions

Basic assumptions of Porter's competition theory;

1, strategists can know the information of the whole industry, which is obviously difficult to do in reality;

2. The development of the industry is relatively static. In fact, the competitive environment of enterprises is always changing, and the change is uncertain, and the speed of change is faster than the model shows. If the analyzed strategy is applied to the changed external environment, it will bring greater risks to the enterprise.

3, the industry scale is fixed, therefore, only by taking the opponent's share to occupy more resources and markets. But in reality, enterprises often do not eat their opponents, but make big cakes with them to get more resources and markets. At the same time, the market can increase its capacity through continuous development and innovation.

4. There is only a competitive relationship between the same industry, and there is no cooperative relationship. But in reality, there are many cooperative relationships between enterprises, which are not necessarily competitive relationships; It underestimates the possibility of establishing long-term cooperative relations with suppliers, customers or distributors and joint ventures to eliminate the threat of substitutes. In reality, we can see many business models for establishing long-term and stable customer relationships. Sometimes, a victory between the two sides may be more beneficial to everyone than a life-and-death competition.

5. The external environment is the limiting factor that leads enterprises to choose the strategy of obtaining high profits.

6. Most enterprises competing in the same industry or market segment have the same strategic resources and similar strategies.

7. Resources used to implement the strategy can easily flow between enterprises. Due to the flow of resources, any resource differences that may occur between enterprises can only be short-lived.

8, enterprise decision makers are rational, will maximize the interests of enterprises as their own responsibility.

(C), analysis of the limitations of the elements

1, which restricts five key roles from the object.

But in fact, there are other roles in the industry, and the importance of roles will be different in different industries or different periods. For example, the government, industry associations, industry alliances, dealers at all levels, the media and so on. Like the previous telecommunications industry, the government directly determines the entry threshold of competitors and limits the heat of competition.

2. Ignore the multiplicity of the competitive position of the five competitors.

In fact, a competitor may play multiple roles in a competition model, such as being both a buyer and a supplier, and it may have business dealings with enterprises in the industry and other enterprises. For example, if the enterprise in the industry under study is a computer manufacturer, the software manufacturer should not only buy computers from the computer manufacturer, but also supply software to the computer manufacturer, so that the software manufacturer is both a user and a supplier. At the same time, software manufacturers may also provide corresponding software to potential entrants, substitute producers and users, so their roles may be multiple. Porter did not explain these problems in his model.

(D) understanding the limitations of the relationship between the analysis elements

1, only talk about industry competition, not cooperation.

There are no eternal enemies, only eternal interests. Competition and cooperation coexist. This model underestimates the possibility of establishing long-term cooperative relations between enterprises and suppliers, customers or distributors, and competitive enterprises to reduce the threat between them. "

2. Porter's model is static, not dynamic.

This dynamic performance in time and space. The dynamic performance in time is that in a competitive model, it is a supplier at one time and may become a buyer at another time. The dynamic performance in space is: it is a role in a competitive model, such as a buyer; In another competitive mode, it is another role, such as suppliers.

(E) Understanding the limitations of the relationship between theory and reality

Because Porter's competitive strategy theory can't explain why some unattractive industries can get high profits? And there are enterprises with poor operating performance in industries with high average profit level? Why do many enterprises fail to diversify into unrelated industries with high average profit rate? For this reason, Porter put forward the value chain theory in 1985, trying to seek the source of competitive advantage from the process of internal value creation of enterprises and make up for the lack of attention to internal factors of enterprises. Obviously, the enterprise is a complex system, and it is too simple to regard the enterprise as a group of activities. Moreover, Porter's strategy only tells people what kind of strategy to adopt under what kind of market structure, and does not provide strategic guidance on how to change the market structure.

Fourth, the counterexample of competition theory.

A classic counterexample of competition theory in China market is Zhou's 360. According to Porter's five-force competition model, Jay Chou has no chance of winning.

Jay's success began with a deep understanding of consumers, making experience (making use simple enough), making products (free+anti-virus), running in small steps, and continuing to iterate, so as to identify the market gap and further subvert the industry rules.

The successful system of 360 is summarized as follows:

360 product building rules = think like an idiot+act like an expert.

1, user perspective (idiot theory) = add value while making it simple enough. The essence of 360 products: free+antivirus (directly hitting the core needs of consumers)

2. Micro-innovation (expert theory) = finding the right buying point+running in small steps, and iterating constantly.

4. Enlightenment: the breakthrough password of weak brands: find the gap and subvert the industry rules.

Postscript 1: Prospect of strategic theory research direction

The research direction of China's enterprise theory, I think we should start from the following two aspects.

1. Explore the multi-center strategic system engine and interaction mode from a middle perspective.

From the perspective of corporate social relations, an enterprise should not only deal with the relationships among internal organizations, people, organizations and people, but also with competitors, suppliers, complementary producers, potential producers, governments, enterprise associations, universities, research institutes, communities and other organizations to maximize corporate social capital.

From the commercial practice of our country, local governments, industry intermediary organizations, technology research and development centers, consulting institutions, etc. It may become a new engine to promote economic development, and the research on multi-center strategic system engine and interactive mode will become an important direction of enterprise strategy research.

2. Explore the new direction of strategic theory research from a macro perspective.

? 2. 1. How to build a systematic and complete theory as a whole may be an important task of strategic management research. The external environmental factors of enterprises include natural environment, economic environment, political environment, history and culture, education level, scientific and technological level, international relations, industrial competition, historical opportunities and other uncertain factors. These factors have different positions and functions in different periods of national, industrial and enterprise development. From the essence of strategic management, strategic management is to make the internal factors (dimensions), social relations and environmental factors of enterprises also show coordination, consistency and integration.

At present, Lin Yifu's Xinjiegou theory (from the perspective of industrial economic structure) and Chen Ping's metabolic growth theory (from the perspective of development momentum) have made effective explorations.

? 2.2. Starting from the practice of China and the cultural tradition of China's holistic view, it will be a new direction to re-examine the strategic development theory of western enterprises.

Postscript 2: Three basic judgments on the development trend of enterprise strategy theory discipline

Put forward the following three basic views on the development trend of strategic management research.

First, from the jungle to integration.

The theory of strategic management will gradually move from the study of a single factor to integration, forming a complex theoretical jungle, that is, combining complex factors to form a unified and rigorous theoretical system, which is manifested in the enterprise internal-enterprise social relations-enterprise external environment-strategic paradigm. Of course, in the process of integration, it is not excluded to re-understand or deepen a single dimension or element.

Second, in the theory of strategic management, historical analysis will be further strengthened.

As a discipline or science, strategic management theory must have historical analysis, including the analysis of the status and role of internal and external factors in different stages of economic development, industrial development and enterprise development. This kind of analysis will be more beneficial for enterprises in developing countries to formulate strategies according to the actual situation of their own countries and enterprises, rather than blindly imitating the development strategies formulated by foreign enterprises according to foreign strategic theories.

Third, the research methods of strategic management will be further standardized and improved.

With the improvement of strategic management theory, it is inevitable to require the standardization of strategic management research methods. As an empirical science, the theory of strategic management is mainly formed by obtaining empirical data through observation and investigation, and then comparing, summarizing and refining the empirical data to form a general law. With the continuous enrichment, comprehensiveness and systematization of data, the general principles will be continuously improved through analysis and synthesis, and gradually a guiding and relatively scientific theory will be formed.

Postscript 3: Four methods that can't be ignored in the theory of enterprise strategic management.

1, dynamic investigation method. ?

In theoretical research, static analysis is obviously not enough, because everything is constantly changing and developing with the passage of time. Whether it is the enterprise itself, its social relations or its external environment, it changes and develops with time. If we can find the law of this change and development, it will be of guiding significance for understanding and formulating strategies.

2. Historical investigation method.

2. 1, intermediate historical investigation method. For example, Porter divides a country's economic development into three stages: factor-driven stage, investment-driven stage, innovation-driven stage and prosperity stage. At different stages, various factors play different roles in the internal, social relations and external environment of enterprises.

2.2, stage comparison method. Such as seller's market stage and buyer's market stage. In these two different stages, the status and role of different elements inside and outside the enterprise will be very different. An obvious difference is that in the seller's market stage, enterprises can make money as long as they enter the industry with high average profit and do a good job in basic management, regardless of customers; In the buyer's market stage, customer demand orientation has become a necessary condition for enterprises to win. It may not be accidental that Europe and America began to have strategic management from seller's market to buyer's market in the 1960s.

2.3. Micro-historical survey method. Enterprises have their own logic of emergence, development and change. At different stages of its development, different factors inside and outside the enterprise play different roles. If the enterprise is small, it can be managed by talented people; With the expansion of scale, it must rise to institutionalized management; When an enterprise develops to a super-large scale, it is necessary to upgrade management to the level of culture and ideas, and use ideas and values to direct employees.

3. Dialectical investigation.

Any successful case and theory has its adaptive time and space limitations, which need dialectical investigation. The vitality of economy is rooted in the uniqueness of culture. The fundamental difference between European and American experience and Japanese experience lies in the uniqueness of culture, and the vitality of China's economic development is also rooted in the uniqueness of China market and China culture. Experience can only be used for reference, and culture needs innovation.

4. Reciprocity of subject and object.

The essence of management consulting is to discover demand, create value and meet demand; Put forward the solution to the problem directly, short, flat and quickly on the premise of Party A's interests;

The essence of academic research is to pursue truth, find problems, propose solutions, find truth under certain conditions and promote social development.

Management consulting methods and academic research methods go hand in hand and complement each other.