On Competition

The Bottom Line

ISSN: 0888-045X

Article publication date: 1 March 2000




Porter, M.E. (2000), "On Competition", The Bottom Line, Vol. 13 No. 1. https://doi.org/10.1108/bl.2000.17013aae.003



Emerald Group Publishing Limited

Copyright © 2000, MCB UP Limited

On Competition

Michael E. PorterHarvard Business School PressBoston, MA1998

Keywords Competitive advantage, Competitive strategy, Economy

The author is a widely recognized leading authority on strategy and international competitiveness. This book brings together the range of his seminal writings on competition. Included are 11 of Porter's influential Harvard Business Review articles ranging from how competition affects company and industry strategy, to how companies should approach diversification and global strategy, to how competitiveness theory can be used to find workable solutions to pressing social issues such as healthcare and the revitalization of America's inner cities. For the first time, Porter includes two new articles written especially for this book, which represent his most recent thinking on critical issues concerning competitive strategy and international competitiveness. He discusses the counterintuitive role location plays in competition; and the role of "clusters" - critical masses in one place of unusual competitive success in a particular field - and their implications for government policy, company and institutional behavior. And his personal statement on his most important theories, how they evolved over time, and how the key themes of his ideas are linked together introduces all of these articles.

Although the potential for competitive strength exists in the USA because of the enormous pool of investment capital, Porter is not reluctant to critically analyze the position of US business in the world of international competition. That is to say that the US system of allocating investment capital both within and across companies is failing. This has put US corporations in a range of industries at a serious disadvantage in global competition and ultimately threatens the long-term growth of the American economy. Because of the systemic nature of the problem, Porter suggests that the reader needs to question much of what constitutes the US system of management. He states that this is a system which, given its emphasis on autonomy and decentralization; on the process of financial control and investment decision making; and on its heavy use of compensation systems which creates a divergence of interest between the shareholders, corporations and their managers, impedes the flow of capital to those corporate investments that offer the greatest payoffs. Failure to change this system will ensure the continual competitive decline of key sectors of the US economy.

For those interested in what it takes to compete effectively in the twenty-first century, Porter offers a number of significant insights. It is clear from his analysis that to compete in the global economy, businesses must continually innovate and upgrade their competitive advantage. Innovation and upgrading come from sustained investment in physical as well as intangible assets - human resources, employee skills and supplier relationships. "Thus the changing nature of competition and the increasing pressure of globalization make investment the most critical determinant of competitive advantage."

Kay Ann Cassell Associate Director, Programs and Services for the New York Public Library's Branch LibrariesMarina I. Mercado Adjunct Faculty member at Mercy College, New York and a consultant in international business.

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