Criticisms of Porter's Strategy as Position Approach

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Do curso por Copenhagen Business School

Strategic Management

1879 ratings

Copenhagen Business School

Strategic Management

1879 ratings

Curso 1 de 4 em Specialization Gestão Estratégica e Inovação

The world of business strategy is in transition. What used to work doesn't anymore -- not necessarily. This course prepares you to think strategically in an age when companies like Apple, Google, and Microsoft have become more valuable (in market cap terms) than companies like Exxon. Today, business value and competitive advantage arise more often from consumer perceptions of what is "cool" than from physical assets or economies of scale. In this course -- the first of a three-course specialization tailored specifically for the age of creativity and innovation -- you will gear up for the challenges of strategy formulation and implementation in a 21st century business. After taking the course, you'll be able to: - Explain why "doing" strategy is considered "the high point of managerial activity" (Mintzberg); - Recognize and avoid the old, tired ideas about strategy that are still out there, so you can adopt fresher, better ideas; - Point out how doing strategy has changed because of advancing technology and globalization; - Prepare for the Capstone Project for the Strategic Management and Innovation Specialization

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What is strategy? And why do we care about it?

Strategy can mean a lot of things. In this module, you'll encounter examples of strategy in action that demonstrate what people mean when they talk about strategy. After completion of the module, you'll be able to: Describe examples of strategy in action; Recognize "strategic situations"; Explain the difference between strategy as "position" and strategy as "capability" (and why that matters).

Strategy's Most Famous Thought Leader: Michael Porter1:26

The Main Ideas in Porter's "What is Strategy?"3:40

Criticisms of Porter's Strategy as Position Approach5:13

The Alternative View: Strategy as Capability6:40

Conheça os instrutores

Robert Austin
Professor, Management of Creativity and Innovation
Department of Management, Politics, and Philosophy

In the quiz we just asked you what you might not like

about the Michael Porter approach to strategy.

Many people have raised objections to

Michael Porter's approach to strategy over the years.

So we are going to spend a few minutes now talking about what some of those might be.

The biggest objection that people have raised to Michael Porter's

ideas about strategy in recent years have to do with

their difficulty in explaining the success of certain Japanese companies.

Companies like Toyota and Honda were very successful in the 60s, 70s, 80s and 90s.

They became dominant players in motorcycle and

automobile markets in the US and Europe and all around the globe.

And if you take a look at the markets that they entered,

Michael Porter would've said that they never should've even tried.

Let's take an example.

Honda, in the 1960s, entered the US market for motorcycles.

At the time, the US market for

motorcycles was dominated by large European firms, large US firms.

They had terrific products for the market.

They were large motorcycles and

the belief at the time was that Americans wanted large motorcycles.

The market for motorcycle riders were people who wore leather,

who emulated biker gangs and Honda had nothing like that kind of product.

They had some product in the high end, but

most of their product was in the smaller bicycles.

The motorbikes that would just take you around town.

So they had no real good idea

about a position to establish going into the US market.

Instead they just tried it.

Their approach to strategy seemed to be trial and error.

They tried something, they learned from it, they improved.

All the way along, they outperform their rivals operationally.

They were operationally outstanding.

Much more efficient, much lower cost.

Their approach seemed to be, and this is not what Porter would have recommended,

their approach seemed to be move first, strategize later.

And despite Porter's assertions that other firms could easily copy operational

effectiveness, the other firms in the market weren't successful in copying

What Honda did so well, operationally.

Indeed, Michael Porter has a general problem with

Japanese companies in the 1980s and 1990s.

Eventually Honda came to dominate the US market.

They discovered an entirely new market for small motorcycles in the US market,

which was in fact much larger than the established market already.

No one had a clue that that market existed before.

They found it by trial and error.

So it seems that Honda prevailed, not because they analyzed and

chose a set of actions that constituted a strong position.

But because they were able to execute difficult-to-imitate

operational strategies that allowed them to improve continually.

Porter realizes that he has this problem with Japanese companies.

And so, he's tried to address it over the years.

One of the things that he is famous for

saying is that Japanese companies will have to learn strategy.

In other words, he maintains that Japanese companies don't

actually engage in strategy when they win by operational effectiveness.

Others had been absolutely aghast why that claim.

Henry Mintzberg, another notable strategy professor argues that

Michael Porter is contradicting himself when he makes these arguments.

Mintzberg says that Michael Porter cannot simultaneously argue that

Toyota has not learned strategy and that strategy,

as he defines it, is a prerequisite for business success.

Because no one would argue with the fact that Toyota has been very successful

over the past three or four decades.

You can't have it both ways, is what Mintzberg says.

So, what does this leave us?

It leaves us with a fundamental tension.

On the one hand, we have this idea which Michael Porter quite likes.

And supports strategy as position.

Strategy arrived at in advance from analyzing the industry.

On the other hand, we have strategy as the ability to learn and improve.

We have strategy discovered over time through trial and error and learning, and

maintained through sustainable operational effectiveness advantages.

This is not supposed to be possible according to the ideals of Michael Porter.

We're gonna pause again for a reflective quiz, we wanna see which way you lean.

Do you feel more that you're in the Michael Porter camp?

Do you feel more than you're in the operational affect of this camp?

So, we'll be right back.

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