The implications of Porter’s work, as cited in the Epilogue of Magretta (2012), are listed and discussed below:
1. Vying to be the best is an intuitive but self-destructive approach to competition.
a. Practical examples of this statement are:
• Brand extension failure: Colgate's Kitchen Entrees frozen dinners, Smith and Wesson bicycles, Frito-Lay Lemonade, Maxwell House Ready-To Drink Coffee and Clairol's “Touch of Yogurt” shampoo are great examples.
• The retail industry in 2008: Competing companies had to downsize their workforce, massively restructure or even close down while facing successive downturns and online competition. T. J. Maxx, a department store chain, survived the downturn onslaught by focusing on its value proposition of budget friendly fashion labels.
• The semiconductor industry in 2009: Severe price undercutting and frequent product refreshes led to critically low margins and few companies like Intel, Samsung and Qualcomm survived the downturn.
b. Apart from brand confusion, competing to be the best, although initially advantageous to customers in terms of price reductions is disastrous for companies due to the costs involved in this race to converge offerings.
c. Since consumers are different and have different needs, companies should focus on their “niche” market segments.
2. There is no honor in size or growth if those are profitless. Competition is about profits, not market share.
a. Practical examples of this statement are:
• The failures during the merger boom era of 1990-2014: Many highly publicized mergers and acquisitions (M&A) failed during this era, notable ones include Daimler-Benz and Chrysler, AOL and Time Warner, eBay and Skype, Kmart and Sears, Bank of ...
... middle of paper ...
c. Strategic planning also involves a decent bet on the unique value proposition.
d. Magretta (2012) shows with the Dell’s and Nestlé’s examples that once the commitment is visible and the supply chain is functional, even suppliers will contribute to the company strategy.
e. In recent times, the internet revolution, the mobile device era, deregulation and globalization have changed whole ‘industry structures’ which has caused severe turbulence and uncertainty for planning. Magretta’s (2012) example of Apple’s turbulent past shows that good strategy will ensure sustainability by facilitating the right tradeoffs and the right innovation.
Magretta, J. (2012). Understanding Michael Porter: The Essential Guide to Competition and Strategy. Harvard Business Press. Retrieved from http://common.books24x7.com.ezp-01.lirn.net/toc.aspx?bookid=45565
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