Thursday, August 27, 2009

The Biz School Chronicles :: The Five Competitive Forces That Shape Strategy

It's exam time again and I'm feeling the pressure. Stacks of books to read, notes to make. And then there are those Financial Management and Operations Research formulas. As usual the Internet is a major source of reference. Studying becomes that much easier when everything is stored in a searchable index on line. The best part is that in most cases, instead of just reading a quote in a text book, you can directly hear it from the one who said it in the first place.

I came across Porter's Five Forces quite a few times while studying (It's mentioned everywhere from Marketing to MIS) and thought, why not hear it straight from the source? Let me tell you, it's one thing to read quotes and excerpts in text books and a completely different experience when you hear the original thinker explain it. In case you are wondering here's what you would see in a text book (more like a copy paste of Wikipedia).
"Porter's five forces analysis is a framework for the industry analysis and business strategy development developed by Michael E. Porter of Harvard Business School in 1979. It uses concepts developed in Industrial Organization (IO) economics to derive five forces which determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one where the combination of forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition"."
Boring as watching paint dry right? Well, it was for me. And memorizing theory direct off the text book never works for me. But I like images though. Charts and graphs seem to get imprinted in my head better than any other form of data representation.

But my brain still wasn't giving me the right signals. It's giving me the "You have read!" stimuli but not "You have learnt!", which is what I want at this particular instance. There's a huge difference between those two individual signals. If you are simply satisfied with the first, you will get burnt at some point. So I finally turned to Google and came across this next video, where Michale Porter himself explains one of his most cited works.