Michael Porter – Five Forces Analysis

Michael Porter – Five Forces Analysis – Contents

Michael Porter Biography
Michael Porter’s Big Ideas
- Porter’s Five Forces Analysis
- Porter Hypothesis
- Porter’s Four Corners Model
Interesting Facts and Insights about Michael Porter
Career Advice Quotes by Michael Porter
Business Advice Quotes by Michael Porter
Leadership and Management Advice Quotes by Michael Porter
Books by Michael Porter
Publications by Michael Porter
Common Questions about Michael Porter
Videos about Michael Porter
Michael Porter Quotes

Michael Porter

Michael Eugene Porter is an academic known for his theories on economics, business strategy, and social causes. He is a University Professor at Harvard Business School.

Michael Porter created Porter’s five forces analysis, which is instrumental in business strategy development. Porter has also contributed “Porter Hypothesis” and “Porter’s Four Corners” model.

Michael Porter’s Big Ideas:

Porter’s Five Forces Analysis

Porter’s Five Forces Framework is a tool for analyzing the competition of a business. It draws from economics to derive five forces that determine the competitive intensity and, therefore, the attractiveness of an industry in terms of its profitability.

An “unattractive” industry is one in which the effect of these five forces reduces overall profitability. The most unattractive industry would be one approaching “pure competition,” in which available profits for all firms are driven to normal profit levels.

Porter’s Five Forces include:

Substitutes: The threat of substitute products or services
Rivals: The threat of established rivals
New Entrants: The threat of new entrants
Suppliers: The bargaining power of suppliers
Customers: The bargaining power of customers.

Porter’s Five Forces

Porter Hypothesis

According to the Porter Hypothesis, strict environmental regulations can actually lead to efficiency and innovations that help improve commercial competitiveness.

The hypothesis predicts that environmental regulation triggers the discovery of cleaner technologies and environmental improvements. Innovation in the process makes production and products more efficient. Cost savings can also be achieved to compensate for the compliance costs.

Porter’s Four Corners Model

Porter’s Four Corners Model is a planning tool that helps to forecast a competitor’s course of action. Porter’s model recommends a deeper understanding of what motivates competitors.

Porter’s Model suggests that understanding a competitor’s internal culture, value system, mindset, and assumptions yields a much more accurate and realistic reading of a competitor’s possible reactions in a given situation. The Four Corners Model helps provide a better understanding of a competitor in the following dimension:

Competitor Motivation Drivers: Determining competitor’s actions by understanding their goals, both strategic, and tactical and the gap between the two.
- The question to be answered: What is it that drives the competitor?
Competitor Management Assumptions: Determining the competitor’s perception of its strengths and weaknesses, organization culture, and beliefs about the competitor’s goals.
- The question to be answered: What are the competitor’s assumptions about the industry, the competition, and its own capabilities?
Competitor’s Strategy: Determine the competitor’s realized strategy and how they are actually performing against their stated strategy.
- The question to be answered: What is the competitor actually doing, and how successful is it in implementing its current strategy?
Competitor’s Capabilities: Determine the competitor’s inherent ability to initiate or respond to external forces.
- The question to be answered: What are the strengths and weaknesses of the competitor?

Interesting Facts and Insights about Michael Porter

Born: Michael Eugene Porter was born in 1947, in Ann Arbor, Michigan, United States.
Father: Michael Porter’s father was a civil engineer who had a career as an army officer.
University: Michael Porter received a BSE with high honors in aerospace and mechanical engineering from Princeton University in 1969, where he graduated first in his class.
MBA: Michael Porter received an MBA in 1971 from Harvard Business School.
Ph.D.: Michael Porter received his Ph.D. in business economics from Harvard University in 1973.
Porter Five Forces Analysis: Studies in industrial organization economics, and attempts to model the effect of competitive forces on industries, inspired the Porter five forces analysis.
Author: Michael Porter is the author of 18 books and numerous articles.
Citations: Porter is the most cited author in business and economics.

“Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different.”
– Michael Porter

Career Advice Quotes by Michael Porter

“The essence of strategy is choosing what not to do.”

“Strategy 101 is about choices: You can’t be all things to all people.”

“Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different.”

“Sound strategy starts with having the right goal.”

“Strategy is about setting yourself apart from the competition. It’s not a matter of being better at what you do – it’s a matter of being different at what you do.”

“Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.”

“If a strategy meets a goal: It’s working. If a strategy meets a target: It’s a success.”

“If all you’re trying to do is essentially the same thing as your rivals, then it’s unlikely that you’ll be very successful.”

Business Advice Quotes by Michael Porter

“Sound strategy starts with having the right goal.”

“Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different.”

“Strategy must have continuity. It can’t be constantly reinvented.”

“A strategy delineates a territory in which a company seeks to be unique.”

“Consumers tend to be more price-sensitive if they are purchasing products that are undifferentiated, expensive relative to their incomes, or of a sort where quality is not particularly important to them.”

“Quality differentials have a tendency to erode as an industry matures.”

“Understanding industry structure is also essential to effective strategic positioning.”

“The essence of strategy is that you must set limits on what you’re trying to accomplish.”

“Companies operating in urban communities have a tremendous ripple effect.”

“Without a goal analytics is aimless and worthless.”

“Cash Cows: Businesses with a high relative share in low-growth markets will produce healthy cash flow, which can be used to fund other, developing businesses.”

“History tells us that monopolies that are truly benevolent and effective are rare.”

“Businesses must reconnect company success with social progress. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do but at the center.”

Leadership and Management Advice Quotes by Michael Porter

“The company without a strategy is willing to try anything.”

“You can’t be all things to all people.”

“Strategic thinking rarely occurs spontaneously.”

“Good leaders need a positive agenda, not just an agenda of dealing with a crisis.”

“If all you’re trying to do is essentially the same thing as your rivals, then it’s unlikely that you’ll be very successful.”

“Innovation is the central issue in economic prosperity.”

“The best CEOs I know are teachers, and at the core of what they teach is strategy.”

“Billions are wasted on ineffective philanthropy. Philanthropy is decades behind business in applying rigorous thinking to the use of money.”

The essence of formulating strategy is relating a company to its environment.

“A target should go with every goal. A target is the value that defines success.”

“Change brings opportunities. On the other hand, change can be confusing.”

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“If all you’re trying to do is essentially the same thing as your rivals, then it’s unlikely that you’ll be very successful.”
– Michael Porter

Books by Michael Porter

Competitive Strategy: Techniques for Analyzing Industries and Competitors, by Michael Porter, 1980
The Competitive Advantage of Nations, by Michael Porter, 1989
Competitive Advantage: Creating and Sustaining Superior Performance, by Michael Porter, 1985
Redefining Health Care, by Michael Porter, 2006
Cases in Competitive Strategy, by Michael Porter, 1983
Can Japan Compete? by Hirotaka Takeuchi, Mariko Sakakibara, and Michael Porter, 2000
Competition in Global Industries, by Michael Porter, 1986
The Politics Industry: How Political Innovation Can Break Partisan Gridlock, by Katherine M. Gehl and Michael Porter, 2020
Competitive Strategy: What Is Strategy? by Michael Porter, 2010
Capital Choices: Changing the Way America Invests in Industry, by Michael Porter, 1992
From Competitive Advantage to Corporate Strategy, by Michael Porter, 1985
Green and competitive: Ending the stalemate, by Michael Porter, 1995
Competitive Advantage of Nations: creating and sustaining superior performance, by Michael Porter, 2011

Publications by Michael Porter

Creating shared value, by Michael E. Porter, Harvard Business Review (HBR), 2011
“What Is Strategy?” by Michael E. Porter, HBR’s 10 Must Reads on Strategy, 2010
On competition, by Michael E. Porter, Harvard Business Press, 2011
The competitive advantage of corporate philanthropy, by Michael E. Porter, Harvard Business Review, 2002
The determinants of national innovative capacity, by Michael E. Porter, Journal: Research Policy, 2002
The Economic Performance of Regions, by Michael E. Porter, Journal Regional Studies, 2002
The five competitive forces that shape strategy, by Michael E. Porter, Harvard Business Review, 2008
Strategy and the Internet, by Michael E. Porter, Harvard Business Review, 2001

“You can’t be all things to all people.”
– Michael Porter

Common Questions about Michael Porter

Who is Michael Porter?
- Michael Eugene Porter is an American business management academic known for his theories on economics and business strategy.
What is Michael Porter’s theory?
- Michael Porter created Porter’s “Five Forces Analysis”, “Porter Hypothesis” and “Porter’s Four Corners” model.
What are Porter’s Five Forces?
- Substitutes: The threat of substitute products or services
- Rivals: The threat of established rivals
- New Entrants: The threat of new entrants
- Suppliers: The bargaining power of suppliers
- Customers: The bargaining power of customers.
Where was Michael Porter born?
- Michael Porter was born in 1947, in Ann Arbor, Michigan, United States.

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