Businesses Always Confuse Goals With Strategy

For American academic Michael Porter, entrepreneurs should never copy their competitors blindly. “Study hard what your competitors are up to, and do what your business requires,” he said addressing a jam packed audience in the national capital recently. Talking about multinational companies, Porter said that “these companies study their competitors and hence witness a sustained growth in their own innovation journey”.“They spend a lot too! And yes, this is one of the functions of running a business,” he said.

When asked about what should entrepreneurs do to protect their interests in a stiffer competition scenario, Porter said, “Industries are closely knit but have well-guarded secrets. A marketplace should be seen as a dynamic force which never ceases to evolve. If an entrepreneur can assess what its competitors are doing, he has won half the battle.”

Explaining further, he said that the “biggest mistake which businesses make is confusing goals with strategies”. Businesses often struggle to align various aspects of the business to achieve this strategy, Porter added. He shared his idea of ‘creating shared value’, which he first illustrated in the Harvard Business Review.

Porter was recently speaking at the Indian National Competitiveness Forum in the national capital. He analysed the level of competition within an industry and business strategy development while touching upon the “Five Forces analysis framework — one of the best known and discussed industrial economics theories.

The Five Forces in Porter’s strategy dynamics are — threat of new entrants, threat of substitutes, bargaining power of customers, bargaining power of suppliers, Industry rivalry.

An ‘unattractive’ industry is one in which a combination of these five forces acts to drive down overall profitability.

“Attractiveness in this context refers to the overall industry profitability. A very unattractive industry would be one approaching “pure competition”, in which available profits for all firms are driven to normal profit,” he said.

Hailing competition, he said competitive environments are actually conducive for business if we see on the brighter side. “More regulations also mean that you can compress your capabilities inside the framework which indeed makes a business more flexible.”

“Yes, it’s true though a lot of people might not agree with me here I have been researching on this for a few years now. My research has come to conclude that ecology is not in conflict with the economy in any way. An economy which promotes ecology (read as natural resources), will sustain in the long run and promote a stronger economy.”