Thursday, March 22, 2012

Should Porter’s Five Forces mix with Sun Tzu’s Five Elements?

Is Five Forces (Man-Made) + Five Elements (Nature) =Superior Strategy?

All profit is not equal. Profit involving shared value enables society to advance more rapidly and allows companies to grow faster.  –Michael Porter

Michael Porter’s Five Forces strategy, a SWOT analysis model on creating a strong position for product or service that allows it to garner outsized profits, makes a significant influence on contemporary business society.

1.      Marketing Entry: How easy is it for others to enter the market? Barriers to entry can include economies of scale, a highly differentiated product, large capital requirements for new entrants, large costs for customers to switch, limited access for newcomers to distribution channels, and government regulations or subsidies

2.       The threat of product/service substitution. Are there any other products and services with sustainable innovation that can easily be substituted for yours?


3.       Bargaining power of buyers. Are a small number of buyers responsible for a large portion of your sales? Do their purchases from you represent a large portion of their procurement costs?...


4.       Bargaining power of suppliers. Do you have multiple suppliers? Are there substitutes you can use? Is it easy to switch suppliers?...


5.       Rivalry among current competitors. How intense is the rivalry among the firms you compete with? How does rivalry affect your ability to sustain profits?

Porter’s Five Forces focus more on marketing dimension of strategy, and his value chain put emphasis on economic position and supply chain/operational efficiency. However, Business is increasingly seen as a major cause of social, environmental, and economic problems at the great recession we’ve just been through, Porter’s latest thought about shared value added new social dimension, give far broader approach, compliment his previous strategy framework with deeper foundation, which is made of five elements, the essential of Sun Tsu’s strategy:

  • Mission: or shared value, inspire people to share the same visions, ideas expectations, and societal needs.

  • Ground: to be able to master mountains, valleys, rivers, plains, etc. it’s about the situation such as offering new opportunities for differentiation, innovation, and growth.
  •  Climate: it’s nature, changes in climatic conditions:  for businesses, social condition is “nature” climate to survive or thrive,  corporate policies and practices need enhance the competitiveness of a company while simultaneously advance social and economic conditions in the communities in which it operates
  • Command: leadership, such as wisdom, humanity, credibility, courage, intelligence and firmness.  As Colin defined: Level Five Leadership = Humility + Will
  • Method: the discipline, the moral cause, reward, punishment, logistics and metrics such as value chain analysis.
Porter may need to meet SunTsu, and the power in five forces may need to mix with the magic of five elements in strategy: Is Five Forces (Man-Made) + Five Elements (Nature) =Superior Strategy?


2 comments:

Great comparison! I love the "Five Forces (Man-Made) + Five Elements (Nature) = Superior Strategy". I would also add a more detailed Porter's Five diagram as in here (straight from MBA textbook). Thanks, porter five model
Regards

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