On Strategy and Leadership: Professor Michael E. Porter Harvard Business School

On Strategy and Leadership
Professor Michael E. Porter

Harvard Business School
Bucharest, Romania
November 30, 2007
This presentation draws on ideas from Professor Porter’s books and articles, in particular, Competitive Strategy (The Free Press, 1980); Competitive
Advantage (The Free Press, 1985); “What is Strategy?” (Harvard Business Review, Nov/Dec 1996); “Strategy and the Internet” (Harvard Business
Review, March 2001); and a forthcoming book. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form
or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Michael E. Porter. Additional information
may be found at the website of the Institute for Strategy and Competitiveness, www.isc.hbs.edu. Version: November 26, 2007, 6pm
20071129 – Romania - Final.ppt 1 Copyright 2007 © Professor Michael E. Porter

How Managers Think About Competition
COMPETING
COMPETING TO
TO BE
BE THE
THE COMPETING
COMPETING TO
TO BE
BE
BEST
BEST UNIQUE
UNIQUE
• The worst error in strategy is to compete with rivals on the same

dimensions

Flawed Concepts of Strategy
• Strategy as action
– “Our strategy is to merge…”
– “… internationalize…”
– “… consolidate the industry…”
– “… outsource…”
• Strategy as aspiration
– “Our strategy is to be #1 or #2…”
– “Our strategy is to grow…”
– “Our strategy is to be the world leader…”
• Strategy as vision
– “Our strategy is to meet our customers’ needs…”
– “… offer superior products…”
– “…to advance technology for mankind…”

Vision Statements
Autodesk
Transforming business by design
Avon
To be the company that best understands and satisfies the product, service and
self-fulfillment needs of women – globally.
Goodyear Tire and Rubber

Become a market-focused tire company providing superior products and
services to end-users and to our channel partners, leading to superior
returns for our shareholders.
Lafarge
To be the undisputed world leader in building materials
Marriott International, Inc.

To be the number one lodging company in the world.

Setting the Right Goals
• The fundamental goal of a company is superior long-term return on
investment
• Growth is good only if superiority in ROIC is achieved and sustained
– ROIC threshold
• Profitability must be measured realistically, capturing the actual profits
on the full investment
• Profitability metrics besides ROIC (e.g., return on sales; ebitda
margin; pro-forma earnings; and cash flow margin) are risky for
strategy
• Prevalent accounting adjustments to reported profitability

(e.g., writeoffs, restructuring charges) can obscure true
economic performance and lead to bad competitive choices
• Goodwill must be treated as part of investment
• Setting unrealistic profitability or growth targets can undermine

strategy
Economic Performance versus Shareholder Value
Economic
Economic Shareholder
Shareholder Value
Value
Performance
Performance
• Sustained ROIC • Stock Price

• Sustainable Revenue Growth • EPS
• EPS Growth
• Shareholder value is the result of creating real economic value

• Pleasing today’s shareholders is not the goal

Economic Foundations of Competition
• The fundamental unit of strategic analysis is the industry

− Defining the relevant industry is important to strategy
• Company economic performance results from two distinct causes
Relative
Relative Position
Position
Industry
Industry Within
Within the
the
Structure
Structure Industry
Industry
- Overall Rules of Competition - Sources of Competitive Advantage
• Strategy must encompass both

Disaggregating Economic Performance:
Industry vs. Position
35%
31.4%
30% 30.8%
Return on 25% 25.4%

Invested
Capital
1985-2002 20%
15%
10%
9.6%
5%
0%
Reebok International Paccar
Industry Average
Note: ‘Invested capital less excess cash’ is the average of the beginning period and the ending period values. Excess cash is calculated by subtracting cash in
excess of 10% of annual revenue.
Source: Compustat (2007), author’s analysis
Profitability of Selected U.S. Industries
1992 - 2006
Security Brokers and Dealers
Soft Drinks
Prepackaged Software
Pharmaceuticals
Perfume,Cosmetic,Toilet Prep
Advertising Agencies
Distilled Spirits
Semiconductors
Surgical and Medical Instruments
Mens and Boys Clothing
Tires ROIC = Earnings before
Household Appliances
interest and taxes divided by
Malt Beverages
Child Day Care Services invested capital less excess
Household Furniture cash
Drug Stores
Grocery Stores
Iron and Steel Foundries
Cookies and Crackers
Mobile Homes Average industry ROIC
Wine and Brandy
Bakery Products in the US:14.9%
Engines and Turbines
Book Publishing
Laboratory Equipment
Oil and Gas Machinery
Soft Drink Bottling
Knitting Mills
Hotels
Catalog, Mail-Order Houses
Airlines
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Return on invested capital, 1992 – 2006 average
Note: ‘Invested capital less excess cash’ is the average of the beginning period and the ending period values. Excess cash is calculated by subtracting cash in excess of
10% of annual revenue.
Source: Compustat (2007), author’s analysis
Determinants of Industry Profitability
Threat of Substitute
Products or Services
Bargaining Power Rivalry Among Bargaining Power

of Suppliers Existing of Buyers
Competitors
Threat of New
Entrants

Strategic Implications of Industry Structure
1. Positioning to Mute the Five Forces

Heavy Truck Industry
Threat
Threat of
of Substitute
Substitute
Products
Products or
or
Services
Services
• Railroads
• Water transportation
Bargaining Rivalry
Rivalry Among
Among Bargaining
Bargaining Power
Power
Bargaining Power
Power
of Existing
Existing of
of Buyers
Buyers
of Suppliers
Suppliers
Competitors
Competitors
• Large suppliers of • Heavy price • Large fleets
engines and drive competition on • Leasing companies
train components standardized models • Owner operators
Threat
Threat of
of New
New
Entrants
Entrants
• Many truck producers

are assemblers
Paccar Competitive Positioning
• Focus on owner-operators
• Design trucks with special features and amenities
• Customization and build-to-order
• Achieve low truck operating costs
• Offer extensive roadside assistance to truckers

Strategic Implications of Industry Structure
2. Shaping Industry Structure

Foodservice Distribution Industry
Threat
Threat of
of Substitute
Substitute
Products
Products or Services
or Services
• Go direct
• Use retail / warehouse channels
Rivalry
Rivalry Among
Among Bargaining
Bargaining Power
Power
Bargaining
Bargaining Power
Power of
of Existing
Existing of
of Buyers
Buyers
Suppliers
Suppliers Competitors
Competitors
• Food processors • Distributors • Restaurants
• Food cooperatives –Purchasing • Schools
• Farmers –Warehousing • Hospitals
–Delivery
• Cafeterias
• Other food service
Threat
Threat of
of New
New establishments
Entrants
Entrants
• Low barriers to entry

Reshaping Industry Structure
Foodservice Distribution
• Offering value-added services
• Offering private-label products
• Moving to national procurement contracts
• Increasing the use of sophisticated information technology

Determinants of Relative Performance
Differentiation
(Higher Price)
Competitive
Competitive
Advantage
Advantage
Lower Cost

Economics of Strategic Positioning
Southwest Airlines
Revenue and Cost per Available Seat Mile, Average of 1998 - 2000
12
Operating Profit per

Pricing
10 Available Seat Mile
Differential:
1.72
Cost
Advantage:
8 2.44
Cents
per ASM
6
Operating Cost per
Available Seat Mile
0
Southwest Airline Industry Average
Note: ASM (Available Seat Miles) defined as total seats available multiplied by miles flown
Source: Airline annual reports and author’s calculations
Foundations of Economic Performance
The Value Chain
Firm Infrastructure
(e.g. Financing, Planning, Investor Relations)
Human Resource Management

Support (e.g. Recruiting, Training, Compensation System)
Activities Technology Development
(e.g. Product Design, Testing, Process Design, Material Research, Market Research) M
Value
Procurement a
(e.g. Components, Machinery, Advertising, Services) r What
g buyers are
Inbound Operations Outbound Marketing After-Sales i willing to
Logistics Logistics & Sales Service pay
n
(e.g. Incoming (e.g. Assembly, (e.g. Order (e.g. Sales (e.g. Installation,
Material Component Processing, Force, Customer
Storage, Data Fabrication, Warehousing, Promotion, Support,
Collection, Branch Report Advertising, Complaint
Service, Operations) Preparation) Proposal Resolution,
Customer Writing, Web Repair)
Access) site)
Primary Activities
• Competing in a business involves performing a set of discrete

activities, in which competitive advantage resides
Defining the Value Chain
Commercial Construction
Firm Infrastructure
(Strategic Planning, Finance, Control, Administration, Legal, Safety, Risk Management)
Human Resource Management

Support (HR, Training, Recruiting)
Activities
Technology Development M
(Information Technology, Business Systems)
a
Procurement
(Materials, Subcontractors, Services) r
Client Bidding and Pre- Construction Project After- g

Development Selection Construction Management Closeout Completion
Support i
 Marketing  Bidding  Obtaining permits  Managing the  Site cleanup  Ongoing
 Business  Project risk and licenses client interface  Manage customer
development assessment  Site preparation  Architect and subcontractors’ support n
 Client  Securing  Estimation of engineering transition out of  Warranties
relationship insurance pricing, materials, coordination the site
management coverage and schedule  Site  Preparing final
 Pipeline  Advanced ordering management documentation
management of materials  Coordinating  Client
 Subcontractor logistics satisfaction
contracting  Updating survey
documentation
Primary Activities
• There can be different ways of configuring the value chain in the same industry
Source: Interviews with Suffolk managers
Note: Risk Management and Legal department are part of the firm infrastructure, but they also play a role specific to each project during the contracting phase
Achieving Superior Performance
Operational Effectiveness is Not Strategy
Operational Strategic
Effectiveness Positioning
• Assimilating, attaining, and • Creating a unique and

extending best practices sustainable competitive
position
Run the same race faster Choose to run a different race

Five Tests of a Good Strategy
• A unique value proposition

compared to other organizations
• A different, tailored value chain
• Clear tradeoffs, and choosing what

not to do
• Activities that fit together and

reinforce each other
• Strategic continuity with continual

improvement in realizing the
strategy

Strategic Positioning
Enterprise Rent-A-Car
Distinctive
Distinctive
Value Proposition
Activities
Activities
• Home-city replacement cars for drivers • Numerous, small, inexpensive offices in each
whose cars are being repaired or who need metropolitan area, including on-premises offices at
major accounts
an extra vehicle, at low rates (30% below
airport rates) • Open during daylight hours
• Deliver cars to customers’ homes or rental sites, or
deliver customers to cars
• Acquire new and older cars, favoring soon-to-be
discontinued older models
• Keep cars six months longer than other major
rental companies
• In-house reservations
• Grassroots marketing with limited television
• Cultivate strong relationships with auto
dealerships, body shops, and insurance adjusters
• Hire extroverted college graduates to encourage
community interaction and customer service
• Employ a highly sophisticated computer network to
track the fleet

Defining the Value Proposition
What
What Which
Which
Customers?
Customers? Needs?
Needs?
• What end users? • Which products?

• What channels? • Which features?
• Which services?
What
What Relative
Relative
Price?
Price?
• A novel value proposition can also grow the pie/expand the industry

IKEA, Sweden
Distinctive
Distinctive
Value
Value Proposition
Proposition Activities
• Young, first time, or price-sensitive buyers who • Modular, ready-to-assemble, easy to package
want stylish, space efficient and scalable designs
furniture and accessories at very low price • In-house design of all products
points. • Wide range of styles in huge warehouse stores
with large on-site inventories
• Self-selection
• Extensive customer information in the form of
catalogs, explanatory ticketing, do-it-yourself
videos, and assembly instructions
• Use Ikea designer names on products to
inform coordinated purchases
• Child care provided in the store
• On-site, low-cost, restaurants
• Long hours of operation
• Suburban locations with large parking lots
• Principally self-delivery by customers

GOL Airlines, Brazil
Distinctive
Distinctive
Value Proposition
Activities
Activities
• Convenient, no-frills airline service between 41 • No-frills service

Brazilian and nearby international cities at very
low prices competing with bus transportation • Many flights during late night hours
• Price sensitive business (60%) and leisure • On time performance
travelers • Quick airport turn-around
• Utilize aircraft more hours per day
• Single aircraft type (Boeing 737s)
• 80% reservations made via the Internet

Making Strategic Tradeoffs
• Tradeoffs occur when strategic positions are incompatible

– the need for a choice
Sources of Tradeoffs
– Incompatible product / service features or attributes
– Differences in the best configuration of activities in the value chain to deliver
the chosen value proposition
– Inconsistencies in image or reputation across positions
– Limits on internal coordination, measurement, motivation, and control
• Tradeoffs make a strategy sustainable against imitation by established

rivals
• An essential part of strategy is choosing what not to do

Strategic Tradeoffs
Neutrogena Soap (1990)
• Forgo cleaning, skin softening, and deodorizing

features
• Choose higher costs through the configuration of:

– packaging
– manufacturing
– detailing
– medical advertising
– skin research
• Give up the ability to reach customers via:

– promotions
– television
– some distribution channels
Strategic Tradeoffs
IKEA, Sweden
IKEA
IKEA Typical
Typical Furniture
Furniture Retailer
Retailer
Product Product
• Low-priced, modular, ready-to-assemble • Higher priced, fully assembled products

designs
• No custom options • Customization of fabrics, colors, finishes,
and sizes
• Furniture design driven by cost, • Design driven by image, materials, varieties
manufacturing simplicity, and style
Value Chain Value Chain
• Centralized, in-house design of all products • Source some or all lines from outside
suppliers
• All styles on display in huge warehouse • Medium sized showrooms with limited
stores portion of available models on display
• Limited inventories / order with lead time
• Large on-site inventories • Extensive sales assistance
• Extensive customer information but limited
sales support • Traditional retail hours
• Long hours of operation

Recent Thinking on the Sources of Competitive Advantage
•• “Key”
“Key”Success
SuccessFactors
Factors
•• “Core”
“Core”Competencies
Competencies
•• “Critical”
“Critical”Resources
Resources
• Competitive advantage is seen as concentrated in a few parts of the

value chain

Mutually Reinforcing Activities
Zara Apparel
Word-of- Cutting-
mouth Customers edge fashion
marketing chic but at moderate
and repeat cost- price and
buying conscious quality
Wide
range of Global
styles team of
trend-
spotters
Very Majority Advanced

of productio
Little media frequent
productio n
advertising product machiner
n in
changes y
Europe
Extensive
use of
store
Prime store sales
locations in data
high traffic Very
areas Tight
flexible
coordination
JIT delivery with 20 production
wholly-owned system
factories
• Fit is leveraging what is different to be more different

Source: Draws on research by Jorge Lopez Ramon (IESE) at the Institute for Strategy and Competitiveness, HBS
Strategic Continuity
• Continuity of strategy is fundamental to sustainable competitive advantage

– e.g., allows the organization to understand the strategy
– building truly unique skills and assets related to the strategy
– establishing a clear identity with customers, channels, and other outside entities
– strengthening the fit across the value chain
• Reinvention and frequent shifts in direction are costly and confuse the customer, the
industry, and the organization
• Maintain continuity in the value proposition
• Successful companies continuously improve in how they realize their value

proposition
– Strategic continuity and continuous change should occur simultaneously. They are not
inconsistent
• Continuity of strategy allows learning and change to be faster and more effective

Barriers to Strategy
Flawed Management Concepts
• Misunderstanding of strategy itself
• Poor industry definition
Industry Pressures
• Industry conventional wisdom leads all companies to follow common
practices
• Labor agreements limit ways of configuring activities
• Regulation constrains price, product, service or process alternatives
• Customers ask for incompatible features or request new products or services

that do not fit the strategy

Overcoming Barriers to Strategy
Internal Practices
• Inappropriate goals and performance metrics bias strategy choices
– Short time horizon
• Rapid turnover of leadership undermines strategic direction to

achieve short-term performance benefits
• A desire for consensus blurs strategic tradeoffs
• Inappropriate cost allocation leads to too many products, services, or

customers
• Outsourcing makes activities homogenous and less distinctive

Internal Barriers to Strategy
Neutrogena Soap (2005)
• Prior to the 1990’s Neutrogena was the

number one brand recommended by
dermatologists
• Neutrogena had a relatively narrow target
market but deep penetration and high
customer loyalty
• Beginning in the early- to mid-1990’s, new
growth-oriented management shifted
Neutrogena from a dermatologist-focused
marketing concept to mass market television
advertisements and celebrity endorsements
• Neutrogena lost market share while
Gallderma’s Cetaphil captured the loyalty of
dermatologists, and prospered
Source: Draws on research conducted at the Institute for Strategy and Competitiveness and interviews conducted with a former Neutrogena executive.

Integrating Strategy and Corporate Social Responsibility
• There is a long-term synergy between economic and social objectives
• Company competitiveness and social conditions can both improve
• Business cannot solve all of society’s problems, nor bear the cost of
doing so
• Business must approach its social agenda strategically
• Where is a company able to have the greatest social impact?

Whole Foods Markets
Distinctive
Distinctive
Value Proposition
Activities
Activities
• Natural, fresh, organic, and prepared foods and • Well-lit, inviting supermarket store formats with
health items with excellent service at premium appealing displays and extensive prepared foods
prices sections
• Produce section as “theater”
• Educated, middle class, and affluent customers
• Café-style seating areas with wireless internet for
passionate about food as a part of a healthy meetings and meals
lifestyle • Each store carries local produce and has the authority
to contract with the local farmers
• Information and education provided to shoppers along
with products
• High touch in-store customer service via
knowledgeable, non-unionized, highly motivated
personnel
• Egalitarian compensation structure
• Own seafood procurement and processing facilities to
control quality (and price) from the boat to the counter
• Donates 5% of profits to non-profits
• Each store has “green projects,” directed by
employees to improve environmental performance
• Excellent strategies often include a social dimension of the value proposition

Strategic CSR
ChoicePoint
• ChoicePoint’s core business is providing personal identification, screening, and

credit verification
– e.g., access to ChoicePoint databases, employment background screening, credit
verification, DNA identification and authentication, drug testing, etc.
• The company’s CSR program focuses on providing services and advice to social
organizations:
– e.g., Background checks of volunteers working with children such as Boys & Girls Club
volunteers
– Identity verification for Katrina victims
– Assisting NGOs to find missing children and prevent identity theft
• ChoicePoint leverages its skills, data, technological knowledge, and staff to

maximize social impact
• Its CSR approach is aligned with ChoicePoint’s founding principle: creating a safer
and more secure society through responsible use of information
• CSR activities improve the company’s capabilities around identity issues
– Working with social organizations helps develop new methodologies and capabilities

Strategic CSR
Nestlé in India
• Nestlé’s entered the poor Moga region of India in 1962
• Local milk supply was hampered by small parcels of land, poor soil, periodic
droughts, animal disease, and lack of a commercial market
• Nestlé established local milk purchasing organizations in each town
• Nestlé invested in improving competitive context
– Collection infrastructure such as refrigerated dairies was accompanied by
veterinarians, nutritionists, agronomists, and quality assurance experts to assist
small farmers
– Medicines and nutritional supplements were provided to improve animal health
– Monthly training sessions were held for local farmers
– Wells to secure water supply for animals were dug with financing and technical
assistance from Nestlé
• Nestlé has built a productive milk cluster in Moga, buying milk from more than
75,000 farmers through 650 local dairies
• Moga has dramatically improved social conditions

• Nestlé has developed a long-term competitive advantage in the milk cluster

Strategy
What Is a Strategy? What is Not a Strategy?
• A unique value proposition • Best practice improvement

versus competitors • Execution
• Aspirations
• A different, tailored value chain • A vision
• Learning
• Clear tradeoffs, and choosing what • Agility
not to do • Flexibility
• Innovation
• Activities that fit together and • The Internet (or any technology)
reinforce each other • Downsizing
• Restructuring
• Continuity of strategy with • Mergers / Consolidation
continual improvement in realizing • Alliances / Partnering
the strategy
• Outsourcing
• Internationalizing

The Process of Developing Business Unit Strategy
• Strategy should be developed and periodically reviewed in a formal
process rather than being left to occur spontaneously
– The process need not be highly structured
• Strategy development is best done in a multifunctional team including
the general manager and heads of important functions
• The role of the strategic planning executive or department is to serve as
staff to the team, not be responsible for strategy development
• The strategy team itself should be relatively small to ensure frank and
productive discussion between the leader and senior peers
– Strategy development involves making tradeoffs and exploring options that can
be unsettling and disruptive if lower level people are involved
– Other managers can be invited for particular meetings/input
• The strategy team should conduct its work jointly rather than delegating
components of the strategy to functional areas

Communicating a Strategy
• Strategy involves everyone in an organization, not just top management
• The benefits of strategy are greatest when it is communicated widely in the

organization
• Communicating strategy requires a simple and vivid way of describing the

essence of the company’s unique position
– Symbols of the strategy are invaluable tools
– Repetition
• The basic strategy and value proposition must also be communicated to

customers, channels, suppliers, and financial markets
– What about confidentiality?
• Leaders should not assume that subordinates understand the strategy, or that
they agree with it
– Help each organizational unit translate the strategy into implications for its own
mandate
• Individuals who do not ultimately accept the strategy cannot have an ongoing
role in the company
The Role of Leaders in Strategy
• Lead the process of choosing the company’s unique position
– The CEO is the chief strategist
– The choice of strategy cannot be entirely democratic
• Clearly distinguish operational effectiveness improvement and strategy
• Communicate the strategy relentlessly to all constituencies

– Harness the moral purpose of strategy
• Maintain discipline around the strategy, in the face of many distractions.
• Decide which industry changes, technologies, and customer needs to

respond to, and how the response can be tailored to the company’s strategy
• Measure progress against the strategy using tailored metrics that capture
the implications of the strategy for serving customers and performing
particular activities
• Sell the strategy and how to evaluate progress to the financial markets
• Commitment to strategy is tested every day

The Moral Purpose of Business
• The most important thing a corporation can do for society is to contribute to a

prosperous economy
• Only business can create wealth; other institutions in society are principally involved in
redistributing wealth or investing it to meet human needs
• Corporations are not responsible for all the world’s problems, nor do they have the
resources to solve them all
– Business has no need to be defensive about its role in society
• Business has the tools, capabilities, and resources to make a far greater positive
impact on social issues than most other institutions
• Business is more transparent and more accountable than most foundations and NGOs
• Each company can and should identify the particular set of societal problems that it is
best equipped to help resolve, and from which it can gain the greatest competitive benefit
• Addressing social issues through shared value strategies will lead to self-sustaining
solutions
• Using these principles, businesses can have a greater impact on social good than any
other institution or philanthropic organization

On Strategy and Leadership: Professor Michael E. Porter Harvard Business School

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On Strategy and Leadership

Professor Michael E. Porter

20071129 – Romania - Final.ppt 1 Copyright 2007 © Professor Michael E. Porter

• The worst error in strategy is to compete with rivals on the same

20071129 – Romania - Final.ppt 2 Copyright 2007 © Professor Michael E. Porter

20071129 – Romania - Final.ppt 3 Copyright 2007 © Professor Michael E. Porter

Goodyear Tire and Rubber

Marriott International, Inc.

20071129 – Romania - Final.ppt 4 Copyright 2007 © Professor Michael E. Porter

• Prevalent accounting adjustments to reported profitability

• Goodwill must be treated as part of investment

• Setting unrealistic profitability or growth targets can undermine

• Sustained ROIC • Stock Price

• Shareholder value is the result of creating real economic value

20071129 – Romania - Final.ppt 6 Copyright 2007 © Professor Michael E. Porter

• The fundamental unit of strategic analysis is the industry

- Overall Rules of Competition - Sources of Competitive Advantage

• Strategy must encompass both

20071129 – Romania - Final.ppt 7 Copyright 2007 © Professor Michael E. Porter

Return on 25% 25.4%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Return on invested capital, 1992 – 2006 average

Bargaining Power Rivalry Among Bargaining Power

20071129 – Romania - Final.ppt 10 Copyright 2007 © Professor Michael E. Porter

1. Positioning to Mute the Five Forces

• Many truck producers

• Design trucks with special features and amenities

• Customization and build-to-order

• Achieve low truck operating costs

• Offer extensive roadside assistance to truckers

20071129 – Romania - Final.ppt 12 Copyright 2007 © Professor Michael E. Porter

2. Shaping Industry Structure

• Low barriers to entry

20071129 – Romania - Final.ppt 13 Copyright 2007 © Professor Michael E. Porter

• Offering value-added services

• Offering private-label products

• Moving to national procurement contracts

• Increasing the use of sophisticated information technology

20071129 – Romania - Final.ppt 14 Copyright 2007 © Professor Michael E. Porter

20071129 – Romania - Final.ppt 15 Copyright 2007 © Professor Michael E. Porter

Operating Profit per

Human Resource Management

• Competing in a business involves performing a set of discrete

Human Resource Management

Client Bidding and Pre- Construction Project After- g

• Assimilating, attaining, and • Creating a unique and

Run the same race faster Choose to run a different race

20071129 – Romania - Final.ppt 19 Copyright 2007 © Professor Michael E. Porter

• A unique value proposition

• A different, tailored value chain

• Clear tradeoffs, and choosing what

• Activities that fit together and

• Strategic continuity with continual

20071129 – Romania - Final.ppt 20 Copyright 2007 © Professor Michael E. Porter

20071129 – Romania - Final.ppt 21 Copyright 2007 © Professor Michael E. Porter

• What end users? • Which products?

20071129 – Romania - Final.ppt 22 Copyright 2007 © Professor Michael E. Porter

20071129 – Romania - Final.ppt 23 Copyright 2007 © Professor Michael E. Porter

• Convenient, no-frills airline service between 41 • No-frills service

20071129 – Romania - Final.ppt 24 Copyright 2007 © Professor Michael E. Porter

• Tradeoffs occur when strategic positions are incompatible

• Tradeoffs make a strategy sustainable against imitation by established