Michael Porter's Contribution To Strategic Management Essay
During the 21st century, new challenges have continued to shape the principles and practice of strategy. Faced with a more turbulent business environment, firms could no longer plan their investments. New product introductions, digital technologies have had a massive impact on the competitive dynamics of many industries, creating winner‐takes‐all markets and standards wars. Disruptive technologies and accelerating rates of change have meant that strategy has become less and less about plans and more about creating options for the future, fostering strategic innovation and seeking uncontested market space. The complexity of these challenges has meant that firms need to plan strategically in this ever changing competitive environment.
3.1 Michael Porter contribution to strategic management
To understand how firms operate in competitive markets and how they sustain competitive advantage, Michael Porter looked at three areas namely the five forces model which looks at market / industry attractiveness, the value chain analysis which looks the internal organisations competitiveness and generic strategies which looks at ways by which firms can compete. Porter (1980) made the most influential contribution to the field by employing industrial organisation (IO) economics logic by using a structural analysis approach which focuses on competition beyond a firm’s immediate and existing rivals. Porter’s five forces model provides a useful analytic tool to assess an industry’s attractiveness and facilitates competitor analysis. The ability for a firm to gain competitive advantage, according to Porter (1980), rests mainly on how well it positions and differentiates
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The collective effects of the five forces determine the ability of firms in an industry to make
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