Conclusion – Understanding Michael Porter

Understanding Michael Porter: The Essential Guide to Competition and Strategy


The five tests of a good strategy


Are you offering distinctive value to a chosen set of customers at the right relative price?


Is the best set of activities to deliver your value proposition different from the activities performed by rivals?


Are you clear about what you won’t do so that you can deliver your kind of value most efficiently and effectively?


Is the value of your activities enhanced by the other activities you perform?


Is there enough stability in the core of your strategy to allow your organization to get good at what it does, to foster tailoring, trade-offs, and fit?

Are you offering distinctive value to a chosen set of customers at the right relative price?
A unique value proposition is all about asking the questions who are my customers and is what I am offering worth the price I am charging. By narrowing down your customer base you can offer a tailored product that sets you apart from your competition. Even being different from your customers is not enough if your price is not within the appropriate price range of your customers.

Is the best set of activities to deliver your value proposition different from the activities performed by rivals?
A tailored value chain is when the company understands and broadcasts the most important activities that they offer. The most important activity that a business offers is the source of a company’s competitive advantage.

Are you clear about what you won’t do so that you can deliver your kind of value most efficiently and effectively?
Trade-offs, according to Porter, is a way to differentiate your business from rivals. These trade-offs cause your customers to choose to acknowledge your products/services from your competition’s imitations.

Is the value of your activities enhanced by the other activities you perform?
Being fit across your value chain causes a business to increase their sales. A car dealership sells cars, but the ability to service the vehicle not only increases loyalty to the business but increases revenue. When a business finds ways to offer value beyond the initial product, they will expand their value chain.

Is there enough stability in the core of your strategy to allow your organization to get good at what it does, to foster tailoring, trade-offs, and fit?
Continuity over time means the balance of what sets a business apart from others, but not only in the current market but as well as the foreseeable future.

When you take all these answers and explanations and place them together into a well-rounded strategy, a business can find where they fit in a market that might be saturated with competition. A business needs to find ways to be the first name on their customer’s lips when a product or service is needed, but the company also needs to stay relevant to keep that position of being the first choice of their customers.

Source

Magretta, J. (2012). Understanding Michael Porter. Harvard Business Review Press

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