Which Of The Following Is Least Likely To Provide A Sustainable Competitive Advantage

Strategic management is constantly evolving as both an academic discipline and as a reflection of management practice. This article, based on a recent interview with Michael Porter, assesses his contribution to the development of the discipline in the context of the advances that have taken place since the publication of his seminal work Competitive Strategy in 1980. The authors conclude that Porter has made major lasting contributions to strategy, increasing both its academic rigor and its accessibility to managers. The article and interview place Porter's work at the center of the development of strategic management in terms of the provision of practical analytical frameworks, transforming it into a recognized and recognizable field of academic study and management practice. This feat of transformation has not been equaled before or since, so that 25 years after his first seminal contribution, Porter's work continues to provide remarkable insights into the nature of competition and strategy.

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DOI: 10.1177/1056492607306333

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George Stonehouse and Brian Snowdon

Competitive Advantage Revisited: Michael Porter on Strategy and Competitiveness

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256

Competitive Advantage Revisited

Michael Porter on Strategy and Competitiveness

GEORGE STONEHOUSE

Napier University Edinburgh

BRIAN SNOWDON

Northumbria University

Strategic management is constantly evolving as both an academic discipline and as a

reflection of management practice. This article, based on a recent interview with Michael

Porter, assesses his contribution to the development of the discipline in the context of the

advances that have taken place since the publication of his seminal work Competitive

Strategy in 1980. The authors conclude that Porter has made major lasting contributions

to strategy, increasing both its academic rigor and its accessibility to managers. The arti-

cle and interview place Porter's work at the center of the development of strategic man-

agement in terms of the provision of practical analytical frameworks, transforming it into

a recognized and recognizable field of academic study and management practice. This feat

of transformation has not been equaled before or since, so that 25 years after his first sem-

inal contribution, Porter's work continues to provide remarkable insights into the nature

of competition and strategy.

Keywords: strategy; strategic management; competition; competitiveness; strategizing

Professor Michael Porter is among the founding

fathers of strategic management as a recognized

academic discipline. He has provided strategy

with a rigorous theoretical base but, equally as impor-

tant, he has made the discipline accessible and useful

to practicing managers. His contributions, as an econ-

omist, to the investigation of "competitiveness" at the

level of the firm, industry, and nation over the past 30

years have been fundamental to the development of

both the theory and practice of strategy and strategiz-

ing. Professor Porter has authored/coauthored/

edited 17 books and more than 100 academic articles.

He has acted as a consultant to many of the world's

leading business organizations and governments, as

well as publishing a large number of articles in the

popular business press. Professor Porter is conse-

quently regarded as one of the world's leading author-

ities on competitive strategy in business organizations,

the competitiveness of nations and regions, and more

recently, the application of competitive analysis to

social and environmental aspects of business activity

(Snowdon & Stonehouse, 2006).

Currently, Michael Porter is the Bishop William

Lawrence University Professor at Harvard Business

School and he is only the fourth faculty member from

Harvard Business School to be awarded the distinc-

tion of a university professorship. In its recent assess-

ment of the world's 50 most influential thinkers,

♦♦♦

MEET THE PERSON

JOURNAL OF MANAGEMENT INQUIRY, Vol. 16 No. 3, September 2007 256-273

DOI: 10.1177/1056492607306333

© 2007 Sage Publications

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Accenture's Institute for Strategic Change ranked

Porter as the most influential business intellectual in

the world in 2003. Porter's status as the number one

business intellectual, among a cohort that includes

four Economics Nobel Prize winners and leading

contributors to strategic thinking such as Gary

Hamel, Henry Mintzberg, K. C. Prahalad, and Robert

S. Kaplan, is testament to Porter's influence on both

the theory and practice of strategy.

In June 2001, Porter was established as the head of

the newly founded Institute for Strategy and

Competitiveness (ISC) located at Harvard Business

School. The ISC focuses on the implications of com-

petitive forces for company strategy, assessing the

competitiveness of nations, regions, and cities, and

investigating the effect of competitive capitalism on

society and social progress. In addition, the ISC acts

as a major international center for the development of

management education. In the short period of its

existence, it has produced a prodigious number

of publications including more than 100 National

Competitiveness Profiles for the World Economic

Forum's annual Global Competitiveness Report ,

Regional Cluster Maps detailing the structure and

competitiveness of states, regions, and cities in the

United States, and an extensive database detailing

Company and Industry Financial Performance for

every public company in the United States.

In this article, we provide the text of an interview

that we conducted with Professor Porter at the ISC in

which we discuss his contribution to the develop-

ment of strategic management and the analysis of

competitiveness. To set the interview in context, we

begin by providing a critique and discussion of

Porter's work against the background of the major

issues and recent debates within the discipline.

Porter's Contributions to

Strategic Management

Strategy is in its adolescence as an academic dis-

cipline, with its origins dating back little beyond

the 1960s (Stonehouse & Pemberton, 2002). Its roots

are diverse and can be traced to several disciplines,

including industrial economics, marketing, finance,

psychology, the behavioral sciences, and military his-

tory and tactics. Therefore, it should be of little sur-

prise that there is considerable debate over its key

concepts and frameworks. This fragmented develop-

ment is reflected in diverse views on approaches to

the discipline. McKiernan (1997) identifies four

approaches: the prescriptive approach (also called

the deliberate or planned approach); the emergent

(or learning) approach; the competitive positioning

approach; and the resource, competence, and capa-

bility approach. Mintzberg, Ahlstrand, and Lampel

(1998), in their Strategy Safari , go further, identifying

10 schools of strategy: the design school, the plan-

ning school, the positioning school, the entrepreneur-

ial school, the cognitive school, the learning school,

the power school, the cultural school, the environ-

mental school, and the configuration school. Porter's

contribution to the discipline lies predominantly

within the competitive positioning and planning

approaches, but his influence spreads well beyond.

Porter's work forms the centerpiece of the com-

petitive positioning school, which represented the

dominant strategy paradigm of the 1980s. Porter's

first book on the subject in 1980, Competitive Strategy ,

brought the analytical rigor of microeconomics to

strategy and significantly increased awareness of the

subject among both academics and the business com-

munity. Competitive Strategy was followed by another

equally influential work, Competitive Advantage, pub-

lished in 1985. These two books marked a revolution

in thinking on strategy by developing three linked

concepts, namely, the "five forces," "generic strategy,"

and "value chain" frameworks (Porter, 1980a, 1985a).

These frameworks can be regarded as the major ana-

lytical frameworks of the competitive positioning

paradigm and remain at the heart of most business

school strategy courses to this day. The five forces

framework (Porter, 1980a) allows a firm to assess both

the attractiveness (potential profitability) of its indus-

try and its competitive position within that industry

through an evaluation of the strength of the threat of

new entrants to the industry; the threat of substitute

products; the power of buyers or customers; the

power of suppliers (to firms in the industry); and

the degree and nature of rivalry among businesses in

the industry. According to Porter, the potential for a

firm to be profitable is negatively associated with

increased competition, lower barriers to entry, a large

number of substitutes, and increased bargaining

power of customers and suppliers. On the basis of

analysis of these forces, Porter argues that an organi-

zation can develop a generic competitive strategy of

differentiation or cost leadership, capable of deliver-

ing superior performance through an appropriate

configuration and coordination of its value chain

activities (Porter, 1985a).

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258 JOURNAL OF MANAGEMENT INQUIRY / September 2007

A cost leadership strategy requires a firm to

become the lowest cost producer of a product or serv-

ice so that above-average profits are earned even

though the price charged is not above the industry

average. A differentiation strategy involves creating

a customer perception that a product or services is

superior to that of other firms, based on brand, qual-

ity, and performance, so that a premium price can be

charged to customers. A focus strategy involves the

use of either a differentiation or cost leadership strat-

egy in a narrow market segment. Porter goes on to

argue that a firm must choose between a differentia-

tion or a cost leadership strategy. To be "stuck in the

middle" between the two is likely to result in failure.

The success of a generic strategy in delivering

competitive advantage is dependent on ensuring that

the firm's value chain successfully supports its

generic strategy in adding greater value to its prod-

ucts and services than competitors. The value chain

includes all those activities that contribute to the final

value of an organization's product. Value added, or

margin, is "the difference between the total value and

collective cost of performing the value activities"

(Porter, 1985a). Value chain analysis is Porter's tech-

nique for understanding an organization's ability to

add value through its activities, and their internal

and external linkages, and allows managers to iden-

tify where value is currently added in the system and

where there is potential to create further value in the

future by reconfiguration and improved coordina-

tion of activities.1

The development of the five forces, generic strat-

egy, and value chain frameworks was fundamental

to the emergence of strategy as recognized academic

discipline and, as well as forming the centerpiece of

the competitive positioning paradigm, also provided

the major analytical tools of the planning school.

Despite the obvious value of Porter's contribution

to the discipline and its practice, there have been crit-

icisms of a number of aspects of his work. The five

forces concept has been attacked on the basis that the

principal unit of analysis is the industry rather than

the individual firm. Porter argues that the framework

makes it possible to assess the potential profitability

of a particular industry, and Porter and McGahan

(1997) provide some evidence to support this claim,

whereas Rumelt (1991) argues that firm-specific fac-

tors are more important to the profitability of a busi-

ness than industrywide factors. The framework also

implies that the five forces apply equally to all firms

in an industry, when in reality, the strength of the

forces may differ from business to business on the

basis of firm size and/or the strength of their brand

name. Finally, five forces analysis can be regarded as

rather static at a time when the business environment

is increasingly dynamic. Despite these possible limi-

tations, the framework is the most powerful tool

available for analysis of the business environment to

this day.

The generic strategy framework has been the focus

of far more than criticism (Miller, 1992; Mintzberg,

Quinn, & Ghoshal, 1995). There is considerable evi-

dence that many companies consciously operate a

hybrid strategy combining low cost with differenti-

ated products or services and, rather than being stuck

in the middle, they are highly successful businesses.

Toyota is a prime example. Similarly, low cost, and

low price, alone do not sell products and services.

They must possess qualities that are perceived by

customers as desirable and of value. Furthermore,

Mintzberg et al. (1995) argue that price, together with

image, after sales support, quality, and design, can

be used as the basis of product differentiation. The

resource-based school has more fundamentally ques-

tioned the view that generic strategies cannot be the

basis of competitive advantage and they suggest that

organizations must develop unique firm-specific core

competences that will allow them to outperform com-

petitors by doing things differently and better

(Prahalad & Hamel, 1990). This uniqueness precludes

general recipes for competitive advantage such as

those implied in the generic strategy framework.

Nevertheless, differentiation of products and services

remains fundamental to the means by which organi-

zations seek to gain competitive advantage.

It is interesting to note that whereas the generic

strategy framework has been subject to significant

criticism, the value chain concept has not, although

Porter has been criticized for the fact that he devotes

little attention to the political and social aspects of

organizational behavior in his analysis (Mintzberg

et al., 1995).

Porter on Global Strategies

In 1986, Porter proposed a model of global strategy

based on the generic strategy framework. He argued

that the generic cost leadership or differentiation

strategies can be operated on a global scale as either

global cost leadership or global differentiation—

targeting either an entire global market or a particular

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global segment. Obviously, the success of such strate-

gies will depend on the market being global. When

global market conditions do not exist, a country-

centered strategy can be implemented based on

responsiveness to local needs.

Of much greater significance in relation to global

strategy is Porter's work that advanced the concept

that global competitive advantage depends on the

configuration and coordination of the organization's

value chain across national boundaries (Porter, 1986,

1990). In terms of configuration, organizations must

decide where and in how many nations each activity

in the value chain is performed. The second crucial

decision involves determining how geographically

dispersed international activities are to be coordi-

nated. By making better choices than competitors

over the global configuration of value-adding activi-

ties, and by coordinating those activities more effec-

tively, organizations can achieve a competitive edge

in global markets and industries.

Alternatives to Porter: Knowledge,

Core Competence, and Learning

The 1990s, which were characterized by an increas-

ingly dynamic and turbulent business environment,

saw the competitive positioning school to some extent

eclipsed by the emergence of the resource-based/core

competence, learning, and knowledge-based schools

of strategic management. Theorists argued that the

dynamism of the environment required firms to form

strategy continuously by developing knowledge-

based competences based on continuous organiza-

tional learning. Porter's five forces framework was

regarded as being too static in circumstances when

industry conditions were changing so rapidly. In par-

ticular, the generic strategy concept was undermined

by the performance of Japanese companies who

appeared to successfully combine differentiation and

low cost. Moreover, the value chain, although being a

useful tool, had little to say on the organizational pol-

itics of strategizing. The knowledge, core competence,

and learning schools suggested that competitive

advantage arises from internally developed core com-

petences or distinctive capabilities based on knowledge

developed through organizational learning (Hamel &

Prahalad, 1994; Heene & Sanchez, 1997; Nonaka, 1991;

Nonaka, Toyama, & Konno, 2000; Prahalad & Hamel,

1990; Senge, 1990; Stonehouse & Pemberton, 1999;

Stonehouse, Pemberton, & Barber, 2001). Research in

the late 1980s and early 1990s suggested that choice of

industry is not a major factor in determining business

profitability, rather, the core competence of the organ-

ization is of greater importance (Baden-Fuller &

Stopford, 1992). This indicates that an "inside-out"

approach to strategic management is needed, based

on the premise that competitive advantage depends

on the behavior of the organization rather than its

competitive environment. From this perspective, the

focus for firms has to be on developing knowledge-

based core competences through learning and then

leveraging those competences in various markets.

Strategy was no longer generic but essentially unique

to the organization.

Although the competencies approach provides an

important contribution to the development of strategy

as a discipline, it is not without its own limitations. Its

value lies in placing emphasis on developing the

organization as a unique bundle of resources and com-

petences. On the other hand, it provides few well-

developed analytical frameworks for assisting in this

process. Ironically, as McKiernan (1997) points out, it is

Michael Porter who has "developed one of the most

useful tools for internal resource analysis in the value

chain." By doing so, Porter has made a major contri-

bution to this approach to strategy. There is also a dan-

ger, inherent in the competencies approach to strategy,

that the organization becomes too internally focused

at the expense of customer focus. Research in the 1990s

suggests that successful businesses must be market-

and customer-driven rather than being internally and

process-driven (Greenley & Oktemgil, 1996).

Porter's Response to

His Critics—"What Is Strategy?"

In 1996, Porter's paper entitled "What Is Strategy?"

was published in the Harvard Business Review (Porter,

1996b). In this paper, Porter revisited his earlier views

on strategy and attempted to answer some of the crit-

icisms of his work (see interview). The main thrust of

Porter's 1996 article was to distinguish between strat-

egy, which involves choices and trade-offs between

alternatives, and "operational effectiveness," which

focuses on the ideas of benchmarking, best practice,

and cost minimization. Porter argues that in the late

1980s and 1990s, partly as a result of the success of

Japanese companies, managers became too concerned

with improving operational effectiveness and, as a

result, neglected the importance of strategy. Japanese

Stonehouse, Snowdon / MICHAEL PORTER INTERVIEW 259

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260 JOURNAL OF MANAGEMENT INQUIRY / September 2007

companies appeared to demonstrate that they could

produce at low cost and improve quality at the same

time, emphasizing operational effectiveness as

opposed to strategy. Porter argued that operational

effectiveness was necessary but not sufficient for the

creation of competitive advantage. On the basis that

Japanese companies were, at the time, very success-

ful, Mintzberg et al. (1995) criticized Porter's view

that Japanese companies would have to "learn strat-

egy" if they were to be able to sustain competitive

advantage. However, the well-documented problems

encountered by the Japanese economy and Japanese

companies since the early 1990s would tend to sug-

gest that there is considerable validity in Porter's

arguments (Porter & Sakakibara, 2001, 2004; Porter &

Takeuchi, 1999; Porter, Takeuchi, & Sakakibara, 2000).

Porter's Contribution to Strategy

There is a temptation to view the knowledge, core

competence, and learning approach as the antithesis

of Porter's views. In fact, the competitive position-

ing school is often depicted as being an "outside-in"

approach to strategy, whereas the knowledge, core

competence, and learning school is regarded as being

"inside-out" (McKiernan, 1997). In fact, both view-

points are necessary in the formation of strategy

by organizations. There are clear linkages between

strategies, value-adding activities, core competences,

and resources. Any strategy will be built on the con-

figuration of an organization's value-adding activi-

ties, and resources form the inputs to these activities,

whereas competences and core competences provide

the skills and knowledge required to carry them out

(Stonehouse & Pemberton, 1999; Stonehouse et al.,

2001). The more that core competences can be inte-

grated into value-adding activities, the greater will

be the value added. In fact, the different approaches

to strategic management should be regarded as

"complementary, representing two different forms of

analysis both of which must be brought to bear for

improving the quality of strategic thinking and

analysis" (Mintzberg et al., 1995).

In our view, Michael Porter's contribution to strat-

egy derives essentially from his background train-

ing as an economist and should be judged as such.

Evidence of the esteem in which he is held as an econ-

omist is the award by National Association of Business

Economists of the Adam Smith Prize in 1997 to Porter

in recognition of his outstanding contributions to the

business economics profession. Certain writers have

been highly critical of particular aspects of Porter's

work, but many of their criticisms are ill informed and

misdirected (Mintzberg et al., 1995). By choice, Porter

has not attempted to describe or explain the organiza-

tional dynamics, politics, and processes of making

strategy within organizations. This is not the remit of

an economist, rather, it belongs to the realm of an orga-

nizational theorist or behavioral scientist. To criticize

Porter's contribution to strategy on the grounds that

he does not contribute to organizational theory is the

same as criticizing the contribution of an orthopedic

surgeon to the field of medicine on the basis that he

or she has failed to contribute to the development of

psychiatry. Organizational behavior is not his area of

expertise nor does he claim that it is. However, Porter

has made a major contribution to the understanding of

the economics of competition, which is itself a funda-

mental building bloc to the development of strategy.

When considered from this standpoint, Porter's con-

tributions to the discipline are without equal. Porter's

research papers and books have brought analytical

rigor and practical frameworks to a subject that previ-

ously lacked such credentials. Consequently, strategic

management is now recognized as a credible disci-

pline in its own right.

To date, no single school within the field of strate-

gic management provides a complete or definitive

explanation of strategy and strategizing by organiza-

tions. Strategy and strategizing are by their very

nature eclectic and will draw on a range of view-

points and disciplines. It is against this context that

Porter's contribution should be judged and, in our

view, no other strategist can claim to have had such a

significant individual effect on the discipline.

INTERVIEW2

From Princeton to Harvard

You began your academic life as a student of aerospace

and mechanical engineering at Princeton University, grad-

uating in 1969. What were the main reasons behind your

decision to change direction and become a graduate MBA

and PhD student of business at Harvard University in the

period 1969-73?

I was going along quite happily at Princeton study-

ing aerospace and engineering and doing pretty well.

In fact, I had been accepted for the PhD program in

engineering. Then, at the last minute, I decided that

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Stonehouse, Snowdon / MICHAEL PORTER INTERVIEW 261

engineering would be just too limiting for me. I sud-

denly felt that I might end up in a design team looking

at things like the rotor assembly on a helicopter. This

did not connect at all with my worldview at the time

and so I then briefly thought of going into medical

school. However, I very quickly abandoned that idea

and decided to do an MBA degree, thinking that with

my technical engineering background, this would be a

good combination. I imagined that I would develop a

management career in a technical industry. At that

point, I went to talk with Burt Malkiel, a Princeton

economist specializing in finance. He taught on the

one economics course that I had taken at Princeton as

an undergraduate. I discussed my thoughts on study-

ing for an MBA and Burt advised me to go to Harvard

Business School.

At that point, did you intend to stay on at Harvard to

complete a DBA once you had finished your MBA?

When I arrived at Harvard, I started out with the

intention just to complete an MBA. But after my first

year, in the summer of 1970, I ended up getting a

job in Washington, D.C., in the Department of

Transportation. While working there, I got drawn into

a series of policy issues that were in essence about

economics. That got me thinking and when I returned

to Harvard for the second year of the MBA, I had a

talk with Roland Christianson, who is probably the

world's greatest case method teacher of all time. He

taught business policy, which was the precursor of

what we now call competition and strategy. He really

turned me on to the idea of teaching. So, I ended up

with an interest in economics and research from my

work experience during the summer, but now I had

also acquired a new interest in teaching. It was at this

point that I decided that I wanted to stay on at uni-

versity and teach. I then had another lucky break

when I was deciding about doing a PhD. At Harvard

Business School, there was an opportunity to do a

DBA but I felt that I wanted to do something different.

So, I began to look across the river to the Cambridge

campus where the economists are located. There was

a very small program at the time called the Business

Economics PhD program. This was essentially a PhD

in economics offered by the Arts and Sciences Faculty,

but you could elect for business to be one of your sub-

fields. This sounded great, even though I had not

taken any graduate economics courses. I had taken

some freshman economics and I also had pretty

strong math from my engineering background, so

I was able to survive. During the first year of the PhD

program, I took a course in business policy, or strat-

egy as we now call it, here at the Business School. In

the following year, I studied industrial economics

with Richard Caves and Jesse Markham at the

Department of Economics.

Did many students follow that hybrid route?

No. I must have been one of the very few people

who had ever done that because at the time, the

Harvard Business School was very practitioner ori-

ented, emphasizing case studies and real industries.

In contrast, across the river, the emphasis among the

economists was in developing theoretical models and

producing journal articles. Studying the business pol-

icy and industrial economics courses back-to-back

was absolutely crucial in the development of my

thinking because a couple of weeks into the industrial

economics course, I suddenly realized that the profes-

sors at both the Harvard Business School and the

Department of Economics were talking about the

same issues but they were coming from completely

different perspectives. This fascinated me. While one

intellectual tradition focused on case studies, treating

each study separately, the other tradition focused on

theory and statistical analysis. The idea of bridging

these two fields led to my doctoral dissertation, which

in turn ultimately led to my 1980 book on competitive

strategy. Looking back, I can now see how my being

in the right place at the right time, with inspiring

mentors, allowed me to make the connections that led

to my later work. Now, it is quite typical that students

with an MBA go on to complete a PhD rather than a

DBA. Thirty years ago, that was very unusual. So, I do

credit a lot of my ideas to the fact that I was one of the

first students to be exposed to the stimuli of following

this pathway.

Who were the academics and intellectuals who most

influenced your thinking during this formative period?

As I have already mentioned, Richard Caves and

Roland Christianson were tremendously influential.

Roland Christianson, here at Harvard Business School,

never wrote many scholarly articles. However, this

great man was the master of case method teaching and

the fact that he became a university professor shows

just how highly he was regarded. He inspired me

to become a teacher in the general field of business

and management strategy. Another great influence

was John Linder, who was the head of the business

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262 JOURNAL OF MANAGEMENT INQUIRY / September 2007

economics program. He was a very distinguished

financial economist who, had he lived, would probably

have been awarded the Nobel Prize at the same time

(1990) that Harry Markowitz, Merton Miller, and

William Sharpe received theirs for pioneering work in

the theory of financial economics. He was integral to

that whole important body of work on efficient mar-

kets. Also influential was our former dean, John

MacArthur. Early on in my career at Harvard, I was

in the business policy group. At that time, business

policy was taught by Roland Christianson, Kenneth

Andrews, and Joe Bower, the Brahmins of Harvard

Business School. Meanwhile, I was trying to connect

business policy with the economics that I had learned

across the river. Their response was that this connec-

tion did not seem right and would not lead anywhere.

I will never forget my associate professor review here

at Harvard Business School. At that point, I had pub-

lished several papers on various aspects of industrial

economics in mainstream economics journals such as

the Review of Economics and Statistics , American Economic

Review, Quarterly Journal of Economics, and Journal of

Industrial Economics (Porter, 1974, 1976a, 1979b; Porter

& Caves, 1976, 1977, 1978, 1980; Porter, Caves, & Gale,

1977; Porter, Caves, & Khalilzadeh-Shirazi, 1975). But

I had also written one short course note, which was

called "A Note on the Structure and Analysis of

Industries." This was the very first version of the five

forces idea. That note was judged by the appointments

panel to be "a noble experiment that failed" (laughter).

But I still got my promotion to associate professor. At

that point, John MacArthur, who was associate dean,

could see the internal dynamics of what was going on

in the business policy group. So, he plucked me out of

the MBA program and put me with the PMP program,

which is our program for middle managers where

there is only one person teaching each course. So, I

went from team teaching with this well-established

business policy group, to being on my own, a free

agent interacting with people who were running busi-

nesses every day. This allowed me to cut loose from the

tradition and the biases of the business policy group

and it was during this period that I nailed the

Competitive Strategy book and the body of research

coming out of that (Porter, 1974, 1976a, 1979b; Porter &

Caves, 1976, 1977, 1978, 1980; Porter et al., 1977; Porter

et al., 1975). So, it is interesting to reflect on how ideas

develop and I try to encourage the same kind of

process among the new generation of academics here

at Harvard.

The Role of Economic Analysis

in Business School Research

You mentioned earlier how as a postgraduate student,

you became exposed to the work of economists working

"over the river" at Harvard's Department of Economics.

Also, on your appointment to the position of university

professor, Kim Clark, the dean of Harvard Business School,

paid tribute to you as a "pioneer in using economic princi-

ples to solve important problems in competitiveness." How

important was your economics training to your later work?

It was fundamental to my work. I see my basic dis-

cipline as economics and I see myself as an economist.

There are certain economic fundamentals that influ-

ence everything else and my principle initial contri-

bution was taking some knowledge of industrial

economics and for the first time bringing that per-

spective into the business strategy field. Before my

contributions, thinking on business strategy saw each

case as different and emphasized the strengths, weak-

nesses, opportunities, and threats (SWOT) approach.

Here, you look at each particular case and make lists

without having any analytical framework or rigor. I

wanted to influence thinking on business strategy by

establishing a more analytical approach. What was

needed was a more complete framework. Here is

where the five forces and value chain framework come

in (Porter, 1979a, 1980a, 1980b, 1981, 1985a, 1985b,

1985c, 1998c; Porter, Caves, & Spence, 1980; Porter,

Christensen, Andrews, Bower, & Hamermesh, 1986). I

wanted to think more systematically about cost and

buyer value. But I also wanted to influence the way

that economists look at competition and I think that

the modern work of economists, taking a game theo-

retic approach to competition, reflects the need to

look at competition in a more granular way. I remem-

ber an interesting seminar that took place at the

University of Warwick 2 or 3 years after I became a

professor. Joe Stiglitz, Partha Dasgupta, Steve Salop,

and Mike Spence were all there pushing the discus-

sion in the direction and methodology of economics.3

But I wanted to speak to practitioners, so gradually

over time, my output of economics articles gradually

declined and the output of my more practitioner-

oriented and book-length pieces rose. So, I have always

tried to bridge two fields. I have taken economic the-

ory and concepts and applied them in a productive

way in more practical settings. The challenge is that

you cannot just patch economics on. When I began

looking at industry structure, I studied the work of

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Joe Bain and others (Bain, 1968). The structure, con-

duct, performance framework dominated thinking in

the industrial organization literature in those days

and the notion of industry structure that was deep

rooted in the economics literature was that structure

was all about seller concentration and barriers to

entry. But when I researched into real cases, it soon

became clear that there was much more complexity

involved with the nature of rivalry. I felt that this

more complex perspective needed to be added. For

example, not only are there barriers to entry, there are

also barriers to exit (Porter & Caves, 1977, 1978). So,

there was a lot of intellectual technology that had to

be put in place to make the bridge between the think-

ing that was going on in business schools and the dif-

ferent approach adopted by economists.

When it came to the issue of competitiveness, what was

it that economists were missing in their analysis?

When I came to looking at competitiveness, I found

that there was virtually nothing in the economics lit-

erature that addressed the micro aspects of competi-

tiveness. I wanted to find a framework that would

better capture the full complexity of competition. The

Competitive Advantage of Nations book was a 6-year

effort involving research teams in 10 different coun-

tries because we had to create massive amounts of

primary data (Porter, 1990). My aspiration has always

been to create a two-way dialogue in order to bring

from economics some analytical rigor into manage-

ment thinking but also to bring to economics a deeper

understanding about the nature and deeper reality of

competition. This aspiration has put me in an uncom-

fortable position because the managerial guys think

that you are being too theoretical whereas the econo-

mists think that you are being too managerial (laugh-

ter). I am stunned that my work has been so widely

used in practice although it is a pleasant surprise, and

I think there has been a reasonable acceptance of my

ideas among economists.

Competition as a Unifying Theme

You have contributed to a wide variety of fields including

strategy, competition and competitiveness, industrial eco-

nomics, innovation, the economic development of nations,

regions, and cities, corporate philanthropy, and environ-

mental issues (Porter, 1991a, 1991b, 1991c, 1995, 1996a,

1996b, 2001a, 2001b, 2003a, 2003b; Porter & Kramer 1999;

Porter & van der Linde, 1995a, 1995b). Your recent paper,

in the Harvard Business Review, is on health care in the

U.S. (Porter & Olmsted Teisberg, 2004). Is there a common

theme that connects your thinking on each of these issues?

There certainly is. The core of all of my work is to

establish a deep and sophisticated understanding of

the nature of competition in individual markets. How

do firms compete in markets? How do they develop

strategies? How do they gain competitive advantage?

My early body of work is directly related to these

issues and focused on industry structure and compet-

itive strategy. I wanted to create a new theory of the

firm built around the idea of a value chain. Rather

than seeing the firm as having a production function,

I began to think of the firm in terms of a whole series

of production functions that were interdependent. So,

that initial core of work was really about firm level

competition. I didn't even utter the word government

or locational factors. Those issues were not even on

the radar at that time. Then I got exposed, almost by

accident, to the issue of national competitiveness. I

was appointed by President Reagan to a commission

investigating the competitiveness of the United

States. I immediately started to scratch my head

because there is no simple translation between the

competitiveness of a firm and the competitiveness of

an economy. Drawing analogies between the compet-

itiveness of firms and the competitiveness of nations

involves a fallacy of composition that causes tremen-

dous confusion (Krugman, 1996).9So, when I started

mulling this over and over in my mind, it became

clear to me that in order to understand the competi-

tiveness of nations, it would be necessary to adopt a

bottom-up or microeconomic approach. My work

started with the question, How do firms compete?

That led me to the "cluster" and "diamond" concepts

and a very granular and close-in view of the business

environment (Snowdon & Stonehouse, 2006). This

approach is complementary to the more traditional

top-down approach to economic development, which

emphasizes factors such as institutional development,

trade liberalization, privatization, and macroeco-

nomic stabilization. This same approach is evident in

the recent paper that I coauthored on health care.

What are the main themes in your health care paper?

That paper is all about competition in the U.S.

health care system, which has underperformed for

many years. The U.S. system is predominantly pri-

vate and subject to competition relative to other

health care systems across the world. But there exists

the following paradox. In a well-functioning market

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264 JOURNAL OF MANAGEMENT INQUIRY / September 2007

where you have effective competition, over time,

costs are driven down, product and service quality

should rise, the value of output increases, innovation

occurs, firms that are inefficient are driven out of the

market, and value-adjusted prices fall. But when we

look at the U.S. health care system, we see a very dif-

ferent set of circumstances prevailing which should

be inconceivable in a normal well-functioning com-

petitive market. Costs are high and rising, and cannot

be explained by quality improvements. There are

large unexplained variations in performance and

standards across geographical areas and the diffusion

of best practice is slow. So, in this paper, we ask, What

kind of competition have we created in the U.S. health

care system that is producing these undesirable out-

comes? We argue that health care competition in the

U.S. is zero sum because the various participants

divide value rather than increase it. The reason that I

am able to think about this issue is not because I am

an expert in health care but because the underlying

problem is related to the nature of competition. In the

same way, the work on regions and inner cities is a

derivative of the work on nations (Porter, 1994, 1995,

1996b, 1998b, 1998c, 2000b, 2003a; Porter & Ketels,

2003). It turns out that you can take the same theory

and apply it to nations, regions, and cities, providing

you make some important conceptual adjustments.

The work on philanthropy also integrates the work on

company strategy and competitiveness because it

asks how firms affect society and how society affects

firms (Porter & Kramer, 1999). We need to rethink the

issue of philanthropy from a corporate point of view,

bearing in mind this wider perspective, rather than

seeing philanthropy just as some sort of defensive

public relations exercise aimed at gaining good will

and fending off the anticorporate critics. My research

on environmental issues led me to a "Porter hypothe-

sis," which asks whether or not strict environmental

regulations damage or enhance competitiveness.

After the competitiveness of nations work, I was one

of the first to suggest that there was no necessary

trade-off between being green and competitive.

Because of dynamics and a firm's ability to innovate

in response to strict environmental standards, it is

possible to eliminate much of the pollution in the first

place (Porter & Esty, 1998). So, although my work

may seem disparate, there is a coherent theme run-

ning through it. As I have matured and become

exposed to more and more issues, I have tended to

use the competitiveness model in new directions. One

of my problems is that each of these new areas has its

own literature, journals, and conferences and it is a

real challenge trying to keep up with the latest

research. But it is very difficult to give up a field of

research when your ideas are still the object of attack

and criticism (laughter). There is always a temptation

to react and make another contribution.

Competitive Strategy

You are widely recognized as one of the pioneers of

strategic management as a discipline and your frameworks

for thinking about strategy, namely, the five forces model,

the value chain, and generic strategy, have been very influ-

ential. How well do you think that these ideas have stood

the test of time? Are they likely to be as relevant and influ-

ential in the 21st century as they have been during the last

25 years?

Well, I certainly think so from the feedback that I

receive. I confront practice and practitioners every day

and have close contact with virtually all the people in

the strategic management consultancy industry. If

anything, I think that those frameworks have become

more important over time. That is not to say that there

have not been other points of view. For example, there

have been at least two nominations for a sixth force,

one being the influence of government and the other

complements. In both cases, I respectfully disagree.

While the specifics of competition may change, the

fundamentals change very little. Although both candi-

dates for a sixth force are important phenomena, they

don't have any clear monotonic relationship with

profitability and so they need to be looked at in

another way. I see both as being outside the five forces

even if their influence feeds in through the five forces.

Also, I don't think that there is any other satisfactory

competing framework than the value chain for look-

ing at the firm. That is pretty much accepted. The

problem with the value chain is not so much the idea

itself but the fact that in order to put the idea into prac-

tice requires looking at a lot of detail and deciding

how to apply the idea to specific situations. Of course,

there was an endless debate about generic strategies

and the question, Can you be low cost and differenti-

ate at the same time?

Why did you shift the emphasis of your research away

from the strategy field during the late 1980s and early 1990s?

Basically, what happened was that I did all this

work on strategy, culminating in the edited book,

Competition in Global Industries (Porter, 1986), published

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just after Competitive Advantage, and I also completed

the Harvard Business Review paper, "From Competitive

Advantage to Corporate Strategy" (Porter, 1987). After

that, I was drawn more and more into the competi-

tiveness of nations issue, but at the same time, I was

still running the strategy group here at Harvard

Business School. So, I decided that in order to give

more space to my colleagues working in the area of

competitive strategy, I moved away from this field for

about 6 or 7 years. During this period, the late 1980s

and early 1990s, I devoted my research mainly to the

competitiveness of nations. However, throughout this

period, the debate continued on my earlier work. So,

when I had in place a critical mass of work on national

competitiveness, I returned to the strategy work and

my "What Is Strategy?" paper was published in the

Harvard Business Review (Porter, 1996b). That was

really an attempt to go to the next level and put as

many of these controversial issues to rest as I could.

That article has led to another body of work, and some

day, hopefully soon, the third book in the trilogy on

strategy will be ready for publication. I have a second

draft ready at the moment. I also revised the introduc-

tions to the new editions of the Competitive Strategy

and Competitive Advantage books that were repub-

lished in 1998. Those new introductions also contain,

in more detail, my reflections on the question you

have asked.

In that 1996 paper, "What Is Strategy?," you make

a clear distinction between "operational effectiveness,"

involving best practice and cost minimization, and "strat-

egy," which involves trade-offs and choices. You go on to

argue that in the late 1980s and 1990s, managers became

too concerned with improving operational effectiveness and

as a result neglected the importance of strategy. What led to

this change of direction and why was it a mistake?

I think a number of forces came together. First, the

initial foray into strategic planning ended up becom-

ing very bureaucratic. Companies established strate-

gic planning processes and went through various

rituals, but after 5 or 6 years of this, a lot of companies

began to conclude that this was a waste of time. So,

the notion of strategic planning became somewhat

discredited. I remember there was one particular

issue of Business Week that listed ideas that were in

and ideas that were out. Strategic planning was out!

There seemed to be an element of fatigue setting in on

the idea of strategic planning. Second, there was a

growing obsession or mania concerning change. This

has been around for some time. There is a perception

that the world appears to be changing faster and

faster and this makes strategic planning more diffi-

cult. The third important influence came from Japan.

The Japanese demonstrated in a number of industries

that they could produce at low cost and yet raise qual-

ity. Their success seemed to owe nothing to brilliantly

thought-out strategies but was more the result of

good execution at the process level, using lean pro-

duction, total quality management, and supply chain

concepts. The Japanese success in the 1980s was

largely underpinned by being ahead of rivals in oper-

ational effectiveness. So, these three influences led

companies to focus much more on the operational

rather than the strategic side of business and this ten-

dency still continues. The number one problem that I

discover when I work with a company is their failure

to make the distinction between operational effective-

ness and having a clear strategy. Both are essential for

good performance, but companies need to distinguish

between them. Operational effectiveness is about

performing activities better than your rivals by adopt-

ing various practices that increase the efficiency with

which inputs are utilized. These practices include

total quality management and benchmarking. But

operational effectiveness, while necessary for supe-

rior performance, is not sufficient. What I have come

to understand more recently, and this will be a major

theme of my new book, is that we are never actually

very clear about what strategy is. That explains the

title of that 1996 paper. So many things got bundled

under the notion of strategy that it lost all meaning in

many organizations, and that remains true.

What are your views on Henry Mintzberg's debunking

and critique of the strategic planning process?

Henry Mintzberg takes it even further (e.g., see

Mintzberg, 1993, 1994a, 1994b; Mintzberg & Waters,

1985). He argues that you shouldn't think about devel-

oping a strategy ex ante. Instead, what you should do

is experiment and the strategy will somehow emerge

from the learning process. While Mintzberg is an inter-

esting and provocative guy, I completely reject the

premise of his argument. But it is always helpful to be

challenged, to stretch our thinking, and to make our

assumptions clear.

In the 1990s, the resource-competence-based approach

to strategic management gained increasing acceptance

(Barney, 1991; Grant, 1991). What are your views on this

line of thinking and do you see this approach to be in con-

flict with your own or complementary to it?

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266 JOURNAL OF MANAGEMENT INQUIRY / September 2007

At one level, it can be seen as completely comple-

mentary in the sense that in my formulation, it is

important to look at the firm as a collection of activi-

ties and the value chain is a way of organizing those

activities. The nature and cost of those activities

give rise to competitive advantage. There is a direct

line between activities, cost, price, and profitability.

Resources and competences are one step back in the

chain from this. Presumably, if you have a lot of com-

petence in sales, that will allow you to conduct your

sales activity more efficiently. So, the competence for-

mulation would say that when looking at an organi-

zation's activities, it is useful to look at the balance

sheet of competences and capabilities. That will be an

important determinant of how effective the activity

will be, which then has a direct link to competitive

advantage. The problem that I find with the compe-

tence-resource-based school is its nagging impreci-

sion. What is a competence? What is a capability?

What makes a firm unique? Why is it that a firm is

going to receive superior returns rather than the

resource holder who could bargain up the price? I

have actually written a little about these questions in

my new book. In my own mind, I have come to the

conclusion that the problem with the competence-

resource approach is that it often comes across as

vague and allows companies to make exaggerated

claims about their resources and competences with-

out validating those claims with proper analysis. For

example, how will a firm become more profitable,

through higher price or lower cost or some combina-

tion of the two? How can lower cost and/or higher

price be achieved? How do resources and compe-

tences connect to these questions? I think the

resource-based view has imploded in the sense that

the more that people have investigated the underly-

ing assumptions, the more they question this

approach. Even Jay Barney might say that the only

resource is the ability to change. When you get to that

level, it loses its operational significance.

One article by Peter McKiernan (1997) argues that the

only valid framework for use within the resource-based

approach is your value chain framework.

That's interesting (laughter). In the whole field of

strategy, we have been in the fragmentation era for the

last 10 years. Hopefully sometime soon, we will get

into an integration era. There is a broader issue among

managers and managerial ideas. There seems to be a

pervasive desire to simplify everything down to one

variable, whether it be outsourcing or whatever else is

fashionable. Unfortunately, for those who seek a sim-

ple formula, the subject of strategy is fundamentally

integrated. It is about combining a lot of different

choices in a consistent way. Strategy involves trade-

offs. Hard choices have to be made when formulating

strategy. So, the fundamental lessons of strategy is not

to do something that someone else is already doing

but to position your company in such a way that it can

do something unique and distinctive. That creates an

intellectual tension in the field and is a big problem

when you are trying to communicate with managers.

Another important debate concerns the importance of

the industry vis-à-vis the firm with respect to profitability

(Porter & McGahan, 1997, 1999). Have your views on this

changed at all?

I believe that industry and firm are two fundamen-

tal but different pillars for thinking about strategy. If

you take the goal of performance, we see large and

enduring differences between and across industries in

terms of their average profitability. I think that these

differences can be largely explained using a five

forces framework. But within given industries, we

see large differences between the profitability of indi-

vidual firms, and I think we need a different analyti-

cal framework to explain this. Clearly, there is an

interaction effect in that the part of the way that

industry structure works is giving rise to opportuni-

ties for strategy. For example, if you are in the com-

puter software industry, the reason why software is so

profitable is that firms are able to develop focus and

differentiation of products. Moreover, firms can pro-

tect their unique products through patents. In con-

trast, if you take the airline industry, one of the main

reasons why profitability is much lower here is that

the industry structure is such that any choices that a

particular airline makes can easily be replicated by

other airlines. So, obviously, there is a bridge between

an industry structure and the performance of firms in

that industry. I have been working for years on the

problem of how you partition profit differences across

companies into the industry effect and the firm effect.

Also, how much does the corporate parent influence

the profitability of a firm, and how much is just ran-

dom? My own gut feeling, given the empirical work

that has been done, is that the industry and firm effect

are probably equally important. The industry effects

are probably not as dramatic, but they tend to be more

enduring. It is quite unusual to see an industrial struc-

ture go through really fundamental change. You

might not think that from reading the work of some

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authors, but in practice, there are relatively few

industries that are totally transformed. The firm

effects are often very large but are hard to sustain. So,

if you weight the size effect and the stability of the

effect, their impact is about the same. Managers

should take into account both effects. This is an issue

that we are still wrestling with from an academic

point of view.

You have argued that in developing a strategy, an organ-

ization must start with the right goal, and for firms, the

only goal should be "superior profitability." This sounds

very much like the kind of advice that Adam Smith or

Milton Friedman would offer when discussing how the

profit motive, combined with the invisible hand of compet-

itive market forces, leads to a desirable outcome for society

as a whole (Friedman, 1962).

Yes, I do share that perspective and it also has

implications for discussions of corporate philan-

thropy. Initially, I was blindsided about what goals

companies should set themselves and how they

should measure success against those goals. I tended

to ignore this issue for the first 15 years of my work,

taking it for granted that companies aim to maximize

profitability. But the more deeply I examined compa-

nies, particularly in the 1990s, the more I began to

observe a divergence in corporate practice from the

profitability perspective. One alternative influence

was the idea that we should measure success by share-

holder value, that is, we should measure success by

the appreciation of share price over some period of

time. This perspective suggested that companies

should pay more attention to financial markets and

the forces that are affecting share price when compa-

nies are making strategic choices. Another influence

was an evolution and distortion in the way that prof-

itability is measured, particularly during the Internet

era, for example, looking at profit before amortization,

or the aggressive use of write-offs and restructuring

charges. If a firm can raise its profitability by writing

off its assets and then declare victory, then we have a

problem because that disconnects profitability from

true economic value. This issue of setting the right

goals is one of my current major crusades, especially

when I go and talk with managers. There is a brewing

intellectual argument of the highest order that is going

to emerge around this issue with respect to the capital

markets and how the capital markets interact with the

real economy. For a long time, there has been the

argument that capital markets are efficient, they set

good prices based on all the available information, and

therefore we should take those prices seriously. Now,

we find that even finance theory is beginning to rec-

ognize the importance of behavioral influences. If that

is the case, then what kind of a compass are share

prices as a guide to real resource allocation decisions

within the firm? The intellectual ferment around the

bridge between the real economy and the financial

economy is going to be a very important area of

research and I am encouraged by this. For the first

time, some of my finance theory colleagues are start-

ing to understand that their almost religious belief in

capital market efficiency needs to be revised.

More recently, learning- and knowledge-based approaches

to strategy have developed. How do you view these contri-

butions to the development of the discipline? Have you any

personal contributions to make to their future development?

The basic notion of knowledge creation within

organizations is very important work. It's part of the

body of learning about how firms can improve and

enhance their performance over time. Right now, it

would be hard to argue a direct connection between

that work and strategy. The core notion of strategy is

about being unique, about being different in some

way to gain competitive advantage. Therefore, there

is no one kind of knowledge creation or knowledge

capture that is relevant because it all depends on your

strategy. I see this approach as complementary. In my

own work, I have not paid much attention to this lit-

erature because it is not on my immediate agenda.

What I am interested in right now are questions such

as, Why are there so many companies that don't seem

to have a strategy? Why is it hard to avoid the pres-

sures for best practice improvement and imitation?

Because of my deep exposure to business practice, I

have lately become very interested in the intersection

between organization and strategy. I used to think

that most strategy problems were fundamentally

about bad analysis. This is typical for young people

approaching the issue from a theoretical perspective.

What I have come to conclude more and more is that

a lot of strategy mistakes are a function of the goals

that are set and self-inflicted wounds resulting from

incentive structures and other internal organizational

issues that stand in the way.

Do you feel that the role of strategy makers has changed

in the last 25 years in terms of the issues and environment

facing them, and the strategic options available to them?

It is important to say that strategy is now viewed as

a central function of leaders, whereas 20 years ago,

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268 JOURNAL OF MANAGEMENT INQUIRY / September 2007

there would have been a strategic planning vice pres-

ident and that person would have had a prominent

role in strategy. Now, it is the general manager who

tends to lead the strategy process rather than a plan-

ner. Another difference is that the development of

strategy is now not as formalized in terms of detailed

procedures. It is more of a process that is specific to

each individual company. At one time, companies

used to formulate a strategy every year. Now, it's

every 2 or 3 years. In terms of the overall environment

facing those engaged in strategy, there have been

some dramatic changes. The key dimensions of

change relate to the whole question of the boundaries

of the firm, insourcing, outsourcing, partnering, and

networking. These changes have forced a lot of com-

panies to think about the question, What are we

unique at? On the other hand, it has caused a lot of

companies to lose sight of the fundamentals of com-

petitive advantage. One of my maxims is that beyond

a certain point, the more that you outsource, the less

likely it will be that you have a competitive advan-

tage. If you can outsource, so can everybody else, so

how do you maintain your competitive advantage?

Some of the structural changes that have taken place

with respect to the process of making strategy, who

does strategic planning, and how it is done, have

been improvements. However, at the content level, a

lot of what passes as strategy really amounts to

improvements in best practice and addressing vari-

ous weaknesses. So, in terms of content, some of the

developments have been disappointing and some of

the richness of strategy has been lost. Those who

argue that the Internet and the IT revolution have

made strategy obsolete are wrong. The Internet pro-

vides new forms of competition and in fact allows

companies to establish distinctive strategic positions

(Porter, 2001b).

In a world of increasingly global activity, what has been

the impact on thinking strategically in both large and small

companies?

It is hard to provide a simple answer to that. One

of the key points that comes immediately to mind is

that globalization has generally raised the intensity of

competition and rivalry in a large number of indus-

tries. Second, the degree of globalization, as I would

define it, in terms of true competitive overlap across

markets, varies dramatically across industries. So, if

you are looking at the housing construction industry,

that is very much a localized industry, even though

this industry exists in every country in the world.

Whereas if you look at consumer electronics, this is

very much a globalized industry. This tends to create

a lot of confusion. The typical company perspective is

to regard themselves as a global business given every-

thing they read about and see in the news. Therefore,

a common mistake that I see is that some businesses

treat themselves as being global when clearly they are

not. As a result, they make bad decisions and choices

about their international operations. Globalization in

the true sense of the word, where you have an inte-

grated value chain across geographical and political

boundaries, complicates the problem of setting strate-

gies because there are many players involved who are

sensitive to the nuances of their international opera-

tions. It does tend to create a tendency to have an

overly broad product line and an overly complex way

of doing business. In that sense, globalization makes

it more difficult to have clarity of strategy.

How do you see the field of strategy developing over the

next 10 years?

Right now, I think the trends are very positive for

the following reasons. First, we had the rather disas-

trous experience in the latter part of the 1990s and the

early years of this century when a lot of companies

took a lot of decisions that turned out go badly

wrong. That related to the popular view that there

was a "new economy," that there were new rules of

competition, and that size and scale would drive suc-

cess. If the stock market wanted you to have an

Internet division, then you had an Internet division.

Then, we had carnage followed by restructuring and

downsizing. Most companies are now much more

attentive to their profitability, which, as I have already

stated, is the essential goal. I see this change among

the companies that I work with. There is much more

of a sense that profit is the number one goal. With that

anchor, your ability to compete is much better.

Second, we are seeing companies going back to

basics, revisiting notions such as industry structure,

and asking themselves, "What is our competitive

advantage?" There is a much greater interest and

appetite for getting back to what I see as true strategic

thinking compared to what I saw 3 or 4 years ago. At

that time, everyone seemed to be interested in

growth, doing things as fast as they could, and trying

to get into everything with no concern for the trade-

offs involved. So, I am now optimistic that we will

now have a period where companies cut back on

much of the unnecessary diversification that seemed

to plague everyone a few years back. But people often

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forget this lesson and are likely to make the same mis-

takes again. I am keen to get out there and put in

place a better intellectual architecture because I think

that companies are more receptive now to going back,

rolling up their sleeves, and trying to get a better

understanding of the economic fundamentals that

drive their success or failure. A few years ago, you

could talk strategy but nobody seemed to be listening.

That has now changed.

Capitalism and Social Objectives

You have said that when working on The Competitive

Advantage of Nations, you realized that "viewing eco-

nomic and social issues as separate agendas was wrong and

counterproductive." A successful economy depends on hav-

ing a workforce that is healthy, has incentives to do better,

that is employed in a safe environment where they feel val-

ued. As we discussed earlier, like Milton Friedman, you

also stress that the key goal for businesses is "profitability."

Is there not a potential conflict here between achieving

social objectives and, at the same time, advocating the goal

of profitability?

I have become increasingly interested in the inter-

action between capitalism and society in general. One

of the motivations for this work was the popular idea

that there is a "third way," the notion that there is

some alternative system that combines capitalism and

socialism. In the case of the environment, I thought

that this idea is fundamentally flawed because it

assumes from the outset that there is a trade-off

between ecology and the economy. I thought that we

needed to revisit that assumption and make sure that

the trade-off has not been artificially created by

adopting the wrong policies. If environmental stan-

dards are properly designed, they will trigger innova-

tions. Suppose you see pollution arising from some

productive activity and take the view that there is a

trade-off between output and the environment.

Taking this approach, you are naturally led to advo-

cate policies that require the polluting firm to install

equipment that reduces the pollution. This adds cost

to the production process. But, suppose you reject the

trade-off view and encourage firms to rethink how

they design their production processes so that less

effluent is created in the first place. You often find that

this approach saves money compared to the alterna-

tive. It eliminates, for example, the need to allocate

resources to clean up the effluent and the need to

handle hazardous materials. So, the policy implications

and response will be different depending on which

approach you take to environmental concerns. I was

very persuaded, after I had done the work for

The Competitive Advantage of Nations, that the idea

that there was an inevitable trade-off problem was

unconvincing.

How did you become interested in the question of

philanthropy?

After my work on environmental issues, I became

interested in the whole area of corporate philanthropy.

There was the famous Milton Friedman view that

companies should not be giving away their resources

to charity. Given my understanding derived from the

diamond and clusters framework, it became clear

to me that companies are very dependent on many

things in their immediate environment in order to

operate effectively. So, maybe Friedman was not right

on this. The paper on corporate philanthropy is really

about identifying those areas in which corporate

philanthropic investments actually enhance the com-

petitive context for a company, which creates social

benefits, but also helps a company to sustain its com-

petitive advantage over time. So, I am very interested

in that nexus, and what the implications are for both

public policy and corporate practice. In the field of

corporate philanthropy, there are two dominant rea-

sons put forward in favor of participating in philan-

thropy. First, it is a way of silencing the anticorporate

critics. The second reason relates to enhancing your

brand name through the careful selection of the chari-

ties to whom you donate. Wrap the Olympic flag

around your company and this will improve your

brand image. But I question both of these reasons as

viable approaches to thinking about corporate philan-

thropy. Those approaches do not fundamentally focus

on what are the real social benefits of philanthropic

behavior. If it is just about branding, then why not call

it marketing since there is no financial benefit from

calling it philanthropy. In the U.S., expenditure on

marketing is tax deductible. If you are going to call it

philanthropy, then it is important to focus on those

areas where we can see resultant social benefits that

have a meaningful impact on the long-term attractive-

ness of a location for a companies business. This is

an interesting area because I began by investigating

philanthropy in terms of company behavior, then

jumped over to the competitiveness-location track.

Now, I am interested in how those two areas intersect

and how research on competitiveness impacts on what

companies should do in terms of cluster building,

Stonehouse, Snowdon / MICHAEL PORTER INTERVIEW 269

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270 JOURNAL OF MANAGEMENT INQUIRY / September 2007

engaging in economic development processes and

philanthropic work.

Culture and Economic Performance

You have a recent interesting paper on the impact

of culture entitled "Attitudes, Values, Beliefs, and the

Microeconomics of Prosperity" (Porter, 2000a). The impact

of culture on economic performance and business practices

has always provoked great controversy (Temin, 1997). What

role does culture play in the determination of economic

"progress"?

I think that economic culture is very heavily

derived from the incentives and reality that people

face. For example, the Japanese are legendary for

being very energy efficient. But that behavior has

more to do with the pricing signals and strict energy

efficiency standards that the Japanese face than it has

to do with Japanese culture. In other words, culture

reflects context. I am therefore fairy optimistic that cul-

ture can be changed because it is not inherent but

learned and because culture derives from what has is

rewarded in society. Therefore, changing the rules will

lead to a change in culture. If you live in a society

where rent seeking behavior is rewarded, then you

will inevitably see such behavior becoming wide-

spread. But this does not mean that the population of

this country are inherently unproductive because of

culture (Baumol, 1990, 2002).

Going back to the case of China, it seems clear that their

move from being an increasingly productive society to

becoming an increasingly innovative society will involve a

significant cultural leap.

Yes, but you could say the same thing about Japan.

I actually did a video conference yesterday with

Beijing University. They are one of the affiliates that

teaches my competitiveness course. I was very

impressed with the questions that the students raised,

so it is clear that China has immense potential.

The Role of "Business Intellectuals"

You are widely recognized as one of the world's leading

"business intellectuals" in rankings that include both aca-

demics and practitioners. It is also clear that you care

about how people think and how they behave. Is influenc-

ing thinking the most important role that business intel-

lectuals fulfill?

I firmly believe that my fundamental role is to cre-

ate ideas and to change the way that people think. My

fundamental goal is to change the framework, to

change the perspective of the way that people look at

a problem. Most things in life are driven by ideas. In

my case, I am not writing and addressing my work

primarily to the academic community and literature.

I see my main role as aiming to change practice,

whether it be the practice of government officials set-

ting economic policy or business leaders setting com-

pany strategy. This is deeply embedded in me after

being here at Harvard Business School for so many

years. I always felt that I had to engage in practice.

How does this philosophy work out?

Usually, the way it works is that I will do some

thinking and some research, then I will go and try it

out in real company or a city, region, or country. It's a

kind of iterative process. I try and use any ideas that I

develop. That is very important to me. I also want to

speak to my fellow academics and shape the way they

write and think because communication with other

scholars is a very important way of disseminating

ideas. But the biggest test of my work always comes

when I ask myself the question, Does this idea really

connect and resonate when we confront actual prac-

tice? Here at Harvard Business School, we are encour-

aged and rewarded for taking this approach, whereas

at many other business schools, the natural focus is on

publishing papers primarily for the academic com-

munity. Having said all this, I have written many such

papers myself and indeed I am back writing articles

for economics journals as I did at the start of my

career. I have three or four in the pipeline and I love

doing that work. Some of my best days are those

when I feel that I have completed some work that

scholars will value. But in order to achieve that, par-

ticularly given the way that I attack problems, I feel

that there has to be a connection with actual practice.

Is this vision shared by your colleagues?

It is often very difficult to persuade younger mem-

bers of the faculty that it is changing the world that is

important rather than just communicating with fellow

academics with scholarly articles. There is a tremen-

dous pressure in U.S. academia to publish scholarly

papers, and usually, it is quite difficult to break away

from the existing structure of that literature and

develop ideas that are orthogonal to the mainstream.

This makes it more difficult to achieve true innovation.

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What is your secret for developing innovative ideas?

I think real innovation in ideas requires the bridg-

ing of different disciplines. I see my work as integra-

tive. This is what I was trying to do with my early

work on strategy and competitiveness. People on the

strategy side thought I had landed from Mars, and

even economists thought my work was a little

Martian (laughter). It is important the universities cre-

ate the right structure and environment to facilitate

innovative thinking. Here at Harvard, we have tried

really hard to encourage innovative thinking and we

are very proud of what has been achieved during the

last 25 years. We have some outstanding scholars here

now, such as Robert Merton, whereas before the 1980s,

Harvard Business School was associated with the case

study approach.

NOTES

1. In Porter's value chain framework, the activities of

the organization are divided into primary and support

activities. Primary activities (inbound logistics, operations,

outbound logistics, marketing and sales, and service) are

those that directly contribute to the production of the good

or services and its provision to the customer. Support activ-

ities (firm's infrastructure, human resource management,

technology development and procurement) are those that

aid the primary activities but do not directly add value

themselves.

2. We interviewed Professor Porter in his office at the

Institute for Strategy and Competitiveness, Harvard

Business School, on Thursday, May 27, 2004.

3. Michael Spence and Joseph Stiglitz were awarded the

Nobel Prize in Economics in 2001 for "their analyses of

markets with asymmetric information."

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GEORGE STONEHOUSE is a professor of strategic management and

dean of Napier University Business School, Edinburgh. He is an honorary

professor of the State University of Management, Moscow, Russia, and a

visiting professor at the University of International Business and

Economics, Beijing, People's Republic of China. He researches in the areas

of strategy, knowledge, creativity, and learning in an international context

and has published three books and numerous articles in these areas. He is

actively engaged in consultancy and training with a number of leading

organizations.

BRIAN SNOWDON is Professor of Economics and International Business

at Newcastle Business School, Northumbria University. His main research

interests are in the areas of macroeconomics and international growth and

development. As well as numerous articles in academic journals, he has

authored 10 books in the area of economics, including Reflections on the

Development of Modern Macroeconomics (with H. R. Vane); A

Macroeconomics Reader (with H. R. Vane); Conversations With

Leading Economists: Interpreting Modern Macroeconomics (with H.

R. Vane); Conversations on Growth, Stability and Trade; and An

Encyclopaedia of Macroeconomics (with H. R. Vane). His most recent

book (coauthored with Howard Vane), Modern Macroeconomics: Its

Origins, Development and Current State, was published by Edward

Elgar in March 2005. He is currently working on a new book entitled

Globalisation, Growth and Development.

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... The notion of strategy and building competitive advantages are intrinsically interrelated. However, the strategy discipline requires deep understanding and wide application across global industries (Czainska, 2009;Mok, 2008;Stonehouse & Snowdon, 2007). Particularly, having considered the radical changes happening at a staggering rate in the global education industry, strategy discipline demands new and specific definitions. ...

... Porter (1992) argues competitiveness can occur when two universities meet the test or experience of international competition where the educational standard or experience of students can be measured or maintained. This indicates that both the universities and their workforce need to collaboratively work together to produce advantages via various fronts (Huggins & Izushi, 2015;Stonehouse & Snowdon, 2007). For the collaboration to happen there is the only way which is for the universities to increase the overall productivity. ...

... Competing to be the unique University in the Global Education Industry Fig. 1 The underlying approach for universities to build advantages. Sources (Huggins & Izushi, 2015;Stonehouse & Snowdon, 2007) Competing to be the Best University in the Global Education ...

Digital transformation in the global higher education industry determines the future roadmap to a sustainable education management strategy. This research paper aims to develop a qualitative model that advocates how digital transformation as a propelling force could be used to build competitive advantages for universities. Building competitive advantage is a relative, evolving, and important concept in strategy formulation. In recent years, specifically in the education industry, the notion of building competitive advantage is challenged by global phenomena such as digital transformation globalization, information exchange, digitization and social media in most of the global industries. These phenomena have collectively made the process of building competitive advantage rapidly changing, short-term and contextual. These findings aid the evolution of strategic management practices in universities by providing empirical insights in determining the impactful changes and their connection to evolutionary learning. It also stresses the importance of using the developed model as a decision support system to generate, regulate and retain student experience and expectations. This research paper provides first-hand insight into the impactful changes affecting universities' vision and how they can turn these changes to their advantages and set a road map to design-develop models to integrate and regulate these essential changes in their strategies using evolution learning mechanism and digital transformation strategy.

... The notion of strategy and building competitive advantages are intrinsically interrelated. However, the strategy discipline requires deep understanding and wide application across global industries (Czainska, 2009;Mok, 2008;Stonehouse & Snowdon, 2007). Particularly, having considered the radical changes happening at a staggering rate in the global education industry, strategy discipline demands new and specific definitions. ...

... Porter (1992) argues competitiveness can occur when two universities meet the test or experience of international competition where the educational standard or experience of students can be measured or maintained. This indicates that both the universities and their workforce need to collaboratively work together to produce advantages via various fronts (Huggins & Izushi, 2015;Stonehouse & Snowdon, 2007). For the collaboration to happen there is the only way which is for the universities to increase the overall productivity. ...

... Competing to be the unique University in the Global Education Industry Fig. 1 The underlying approach for universities to build advantages. Sources (Huggins & Izushi, 2015;Stonehouse & Snowdon, 2007) Competing to be the Best University in the Global Education ...

Digital transformation in the global higher education industry determines the future roadmap to a sustainable education management strategy. This research paper aims to develop a qualitative model that advocates how digital transformation as a propelling force could be used to build competitive advantages for universities. Building competitive advantage is a relative, evolving, and important concept in strategy formulation. In recent years, specifically in the education industry, the notion of building competitive advantage is challenged by global phenomena such as digital transformation globalization, information exchange, digitization and social media in most of the global industries. These phenomena have collectively made the process of building competitive advantage rapidly changing, short-term and contextual. These findings aid the evolution of strategic management practices in universities by providing empirical insights in determining the impactful changes and their connection to evolutionary learning. It also stresses the importance of using the developed model as a decision support system to generate, regulate and retain student experience and expectations. This research paper provides first-hand insight into the impactful changes affecting universities' vision and how they can turn these changes to their advantages and set a road map to design-develop models to integrate and regulate these essential changes in their strategies using evolution learning mechanism and digital transformation strategy.

... The industrial and technological revolution has encouraged natural selection which leads to the strongest who wins the competition [12]. ...

... A company can win the business competition if it is able to produce products / services and services that are better than its competitors, while at the same time it is always able to adapt to any changes in the environment [12]. The negative impact of the industrial revolution 4.0 has the potential for bankruptcy of a company, so it is necessary to know early indications so that they can be anticipated before they occur. ...

... The key to success is not easy for a company to have due to changes in the macro environment that are difficult to predict. Likewise, in winning the competition, it must have a competitive advantage [12]. The industrial revolution 4.0 has a positive impact in the form of a capitalization effect, but it can also have a negative impact, namely the destruction effect. ...

... The literature review starts with early studies on the topic of strategy followed by Porter's literature, including his famous books on strategy, "Competitive Strategy" (1980) and "Competitive Advantage" (1985). Porter has shaped the approach to strategy by producing a considerable number of articles where he was the author, co-author or editor of 17 books and more than 100 academic articles (Stonehouse and Snowdon, 2007). ...

Purpose This article analyses the role of cluster facilitators in the Singapore maritime cluster. Singapore has been recognised for its pro-business policies and its ability to attract international shipping companies to set up the ship ownership headquarters and ship management activities in Singapore. Design/methodology/approach The research is an empirical investigation on the approach for industrial cluster development of the Singapore maritime cluster, using the case study research methodology. The case study approach leverages on multiple sources of evidence from deep interviews (of 24 Singaporean firms and 13 Norwegian firms) related observations, documentation and archival records. As a means of contributing to the cluster renewal process, Singapore as the country embarks on the next stage of maritime cluster development, a benchmarking against the Norwegian Innovation Cluster has been incorporated. Findings The research findings reveals that Singapore is lacking in innovation activities that entails multi-firms collaborations and collaboration between multi-firms and research institutions. The existence of cluster organisation to facilitate collaborations between firms in the cluster and between firms in the cluster with research institutions is another contributing factor that are not institutionalised in the Singapore maritime cluster. Research limitations/implications Though the research is grounded primarily on the international business theory, particularly from firm- and country-specific advantages of location decisions, the economic geography theory and cluster theory also complement the theoretical grounding. Practical implications The findings derived from this research aim to facilitate policy makers, maritime leaders and practitioners to develop effective courses of action in current and future maritime industry development. Originality/value The research provides value to maritime industry stakeholders, maritime leaders and policy makers in their firm positioning strategy. Thus, the research adds values to the maritime industry with similar country perspectives and firm values for developing policies.

... Every individual must have the ability and sensitivity in facing challenges into opportunities (Muhammad, 2018). Stonehouse & Snowdon (2007) in their research revealed that every individual whose existence wants to stay awake in global competition must prepare mentally, skills, and have a competitive). ...

... As the future is not completely predictable, there is always a degree of uncertainty in the analysis of business scenarios. At this respect, it is worth noting that Porter [15,16] considers that scenarios are views of future reality based on a set of plausible assumptions that take into consideration significant uncertainties that may influence the market evolution. Under the corporate diplomacy perspective, the understanding of the opportunities and threats that might arise from different business alternatives aims at facing factors that may affect the business performance and the decision making process [17]. ...

• Maria Alejandra Madi

Today, corporate diplomacy refers to a new business governance model in a challenging global order where economic complexity, uncertainty and potential sociopolitical conflicts should be considered in any successful policy and strategy. Indeed, taking into account that the practice of corporate diplomacy enhances the redistribution and reallocation of economic power and wealth, there seems to be a global trend away from the shareholder business model of value creation towards a new one where stakeholders might be considered. However, there has been a controversial understanding of this new global management trend in terms of the configuration of relevant features of market dynamics. Considering this background, and adopting the methodological perspective of case studies, this chapter elaborates an analysis (i) of the complex drivers that shape corporate diplomacy competencies and strategies and (ii) of the potential results of corporate diplomacy in a global trade scenario that has been deeply affected by the coronavirus pandemic. Among the key findings, the Brazilian experience after the outbreak of the coronavirus pandemics shows that the role of corporate diplomacy as a business tool of governance aimed to defend sectorial interests might be crucial to normalize trade flows.

... The Porter competitiveness model is frequently cited as the best model that is useful for benchmarking the comparative advantages of the industry. This model also shows that some countries are more benefited in specific business or industries whereas others are not (Porter, 1990;Chobanyan & Leigh, 2006;Grant, 1991;Stonehouse & Snowdon, 2007;Jin & Moon, 2006;Bhaskaran, 2011). The following has given the operational definition of six components of Porter's model. ...

Bangladesh's government has taken the 7th Five Year plan to implement Sustainable Development Goals (SDGs) by promoting favorable trade policies along with industrialization, digitization, and inclusive development. Hence, well-running trade is considered as the promising indicator to achieve SDGs which is growing exponentially in our country. Here, the Readymade Garment (RMG) is the most influential trading sector to contribute enormously in the export-earning. In recent times, the sector is facing massive changes due to the automation of the Fourth Industrial Revolution (FIR). To sustain in this digital competitive trade market, has become a major challenge for the small RMG industries. A huge number of Small and Medium Enterprises (SMEs) in our country have already been shut down due to automation. The large factories are also changing their manufacturing system by installing automation to cope with the demand for global competition. These are creating an unstable condition for RMG trade. The government needs to take a strategic and integrated plan immediately to gain the competitive advantage of FIR. Otherwise, Bangladesh will lose the international market for the RMGs of the country.

... Borrowing research results from McKinsey in 2016 that the impact of digital technology towards the industrial revolution 4.0 in the next five (5) years, there will be 52.6 million types of jobs that will experience a shift or disappear from the face of the earth [3]. This study's results give the message that every person who still wants to have a self-existence in global competition must prepare self-management, mentality, and skills that have a competitive advantage from others [4]. ...

... In small and medium-sized enterprises (SMEs), this difficulty can still often be exacerbated by a scarcity of strategic resources, which can considerably decrease their sources of competitive advantage (Porter 1980;Dess and Davis 1984;Porter 1991; Barney and Hansen 1994;Stonehouse and Snowdon 2007;Švárová and Vrchota 2014;Yadav et al. 2017;Dong et al. 2019). Due to their small size, SMEs are often characterized as isolated companies with limited resources (Tang 2011;Pinho and Prange 2016) or are classified based on the number of employees and revenues (Montoro-Sanchez et al. 2018). ...

Competitive advantage is a significant concept both in studies of strategic management and in the practice of organizations. The dynamic reality of the market and competitors' innovation capacity make it difficult for companies to achieve their goals and maintain sustainable competitive performance. In small and medium-sized enterprises (SMEs), this difficulty is often compounded by a scarcity of strategic resources, which can considerably decrease their competitive advantage sources. In the present study, we discovered, through a systematic literature review (n = 70), a conceptual typology, with identification of five classes, categorized as (i) methodological procedures, (ii) organizational environment, (iii) organizational performance, (iv) resources/profile and (v) organizational research which were used to capture notions around dynamic capabilities and competitive advantage for SMEs. Likewise, as a result, a diverse selection of three clusters was found to show the positive influence (direct and indirect) of dynamic capabilities on competitive advantage and that performance variables mediate the impact on innovation capacity. Given this, we have answered two research questions related to the (i) discovery of state of the art and (ii) future research directions on Dynamic Capabilities and Competitive Advantage for SMEs.

• Mehmet Sağlam

Küreselleşme çağında rekabetçi baskılar arttıkça, ihracatçı firmalar açısından yurt dışı pazarlarda satılacak ürün ve hizmetler için etkin stratejiler oluşturulması önemli hale gelmiştir. Rekabetin artmasıyla birlikte, ihracatın stratejik faydaları ekonomik yönler kadar önem kazanmakta ve dolayısıyla pazarlama karması stratejileri, firma performansının kritik bir belirleyicisi olarak öne çıkmaktadır. İhracat firmalarının uluslararası pazarda avantajlı konumda yer alması için yerel koşullar önemli olmakta ve rekabet uluslararası olsa da rekabet avantajının kaynağı yerel koşullardan geçmektedir. Uluslararası pazarda başarılı olmak isteyen ve yüksek ihracat performansı hedefleyen ihracatçı firmaların ulusal rekabet gücü olarak ifade edilen ve Porter elmas modelinde yer alan boyutları değerlendirerek hareket etmeleri önemlidir. Yeni ekonomik düzende dijital teknolojilerin benimsenmesi hızlı bir şekilde ilerlemeye devam etmekte ve firmalar hızla dönüşmeye çalışmaktadır. Dönüşümün etkisiyle yeni iş modellerinin ve iş yapış şekillerinin ortaya çıktığı bu süreçte firmaların uluslararası pazardaki başarısı ve rekabet üstünlüğü için uluslararası pazarlama karması stratejilerini gözden geçirmeleri önemlidir. Dönüşüm sürecinde dijital dönüşüm uygulamalarının kullanılması ve dijital gelişmişliğin artması daha iyi bir rekabetçi konumlandırmaya ve daha iyi bir firma performansına yol açacaktır. Bu çalışmada uluslararası pazarlama karması stratejilerinin ve Porter Elmas modeli boyutlarının ihracat performansı üzerindeki etkisi araştırılmıştır. Porter elmas modeli boyutlarından hükümet ve şans ile dijital dönüşümün bu ilişkilerdeki düzenleyici rolünün araştırılması çalışmanın diğer amacıdır. Veri toplama aracı olarak online ve yüzyüze anket kullanılmıştır. İhracat firma yöneticisi katılımcılara ulaşmada Türkiye İhracatçılar Meclisi tarafından sağlanan e-mail listeleri kullanılmıştır. Örneklem yöntemi olarak yargısal örnekleme tercih edilmiş ve 520 katılımcıya ait veri elde edilmiştir. Veri analizlerinde SPSS 21 ve AMOS 21 paket programları kullanılmış ve araştırma modeline yönelik hipotezler yapısal eşitlik modeliyle test edilmiştir. Çalışma sonucunda uluslararası pazarlama karması stratejilerinden ürün, fiyat, dağıtım ve tutundurmanın ihracat performansı üzerinde etkisi olduğu, dijital dönüşüm, şans faktörü ve hükümetin bu ilişkide düzenleyici role sahip olduğu belirlenmiştir. Porter Elmas modeli boyutlarından sadece faktör koşullarının ihracat performansı üzerinde etkisi bulunmazken, diğer boyutların ihracat performansı üzerinde etkisi olduğu sonucuna ulaşılmıştır. Dijital dönüşümün, firma stratejisi, yapısı ve rekabetin, ilgili ve destekleyici endüstrilerin ve faktör koşullarının ihracat performansına etkisinde düzenleyici rolü olduğu,hükümetin ilgili ve destekleyici sektörler ve faktör koşullarının ihracat performansına etkisinde düzenleyici rolü olduğu, şans faktörünün de talep koşulları ve faktör koşullarının ihracat performansına etkisinde düzenleyici rolü olduğu belirlenmiştir. In the age of globalization as competitive pressures increase, it has become important for exporters to create effective strategies for products and services to be sold in foreign markets. As competition increases, the strategic benefits of exports are as important as economic aspects, and thus, marketing mix strategies stand out as a critical determinant of firm performance. The local conditions are important for the export companies to take an advantage in the international market, and although the competition is international, the source of the competitive advantage comes from local conditions. It is important for exporters that want to be successful in the international market and aim to achieve high export performance by evaluating the dimensions of Porter diamond model which expresses national competitiveness. The adoption of digital technologies continues to progress rapidly in the new economic system and firms are trying to transform rapidly. It is important that companies review international marketing mix strategies for their success in the international market and their competitive advantage in this process, where new business models and business patterns emerged as a result of the transformation. Using digital technology applications and increasing digital sophistication in the transformation process will lead to better competitive positioning and better firm performance. In this study, the effects of international marketing mix strategies and Porter Diamond model dimensions on export performance were investigated. The other aim of this study is to investigate the moderation role of digital transformation, government and chance in this relationship. Online and face-to-face survey was used as data collection tool. Export company managers email lists provided by the Turkey Exporters Assembly are used in reaching the participants. Judgemental sampling was preferred as a sampling method and data for 520 participants were obtained. SPSS 21 and AMOS 21 package programs were used for data analysis and hypothesis were analyzed with structural equation models. In the result of the study, it has been determined that product, price, distribution and promotion have an effect on export performance and digital transformation, chance and government have a moderation role in this relationship. While only factor conditions from Porter Diamond Model dimensions do not have an effect on export performance, it has been concluded that other Diamond dimensions have an effect on export performance. It has been determined that digital transformation has a moderation role in the relationship of firm strategy, structure and competition, related and supporting industries and factor conditions between export performance, government has a moderation role in the relationship of related and supporting industries and factor conditions between export performance and finally chance has a moderation role in the relationship of demand conditions and factor conditions between export performance.

• Robert M. Grant

Strategy has been defined as "the match an ovganization makes between its internal resources and skills … and the opportunities and risks created by its external environment." 1 During the 1980s, the principal developments in strategy analysis focussed upon the link between strategy and the external environment. Prominent examples of this focus are Michael Porter's analysis of industry structure and competitive positioning and the empirical studies undertaken by the PIMS project. 2 By contrast, the link between strategy and the firm's resources and skills has suffered comparative neglect. Most research into the strategic implications of the firm's internal environment has been concerned with issues of strategy implementation and analysis of the organizational processes through which strategies emerge. 3

Which Of The Following Is Least Likely To Provide A Sustainable Competitive Advantage

Source: https://www.researchgate.net/publication/238333593_Competitive_Advantage_Revisited_Michael_Porter_on_Strategy_and_Competitiveness

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