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BW Businessworld

Young Turks Take A Class With Strategist Michael Porter In Delhi

Michael Porter in his visit to India spoke about the ‘India’s National Competitiveness Forum’ in New Delhi at the Taj Palace on ‘The Idea of the National Competitiveness’ and ‘Social Progress’

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Michael Porter in his visit to India spoke about the ‘India’s National Competitiveness Forum’ in New Delhi at the Taj Palace on ‘The Idea of the National Competitiveness’ and ‘Social Progress’.

When he had visited India 14 years ago, people were “obsessed with talking about electricity” as the major challenge. The economy has improved a lot since, but much remains to be done, Porter suggested. “The business environment is better but it is not good. Infrastructure is better but it is not good,” he told the delegates, many of whom paid about Rs 25,000 to listen to and interact with him.

But, Porter’s bet is still on India, rather than China. The difference in growth rates between the two countries is closing and India could catch up with, and perhaps even overtake, the levels of its larger neighbour, he said. “We need this incredibly complex democracy to win.”

He is a very well- known business figure, a researcher, a respected academician whose vision and thoughts are resonated in his books widely accepted & read. Porters' five forces analysis is a framework for analysing the level of competition within an industry and business strategy development; is one of the best drawn upon industrial economics theory for studying the competitive intensity and therefore the attractiveness of an industry.

His five forces are - Threat of new entrants, Threat of substitutes, Bargaining power of customers, Bargaining power of suppliers, Industry rivalry.

The professor used three short sessions to explain key concepts he has developed over the years and outlined his views on the Indian economy.  

He began by talking of how businesses often confuse “goals” with a “strategy”, and struggle to align various aspects of the business to achieve this strategy. He described at length the idea of “creating shared value”, which he had first illustrated in the Harvard Business Review.

Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven to normal profit.

Porter refers to these forces as the microenvironment, to contrast it with the more general term macro-environment. He said, “In India, I see a lot of businesses running with the right unit-economics, most Indian know how to do business. However, the Firms are able to apply their core competencies, business model or network to achieve a profit above the industry average. A clear example of this is the airline industry.”

He added that “Competitive environments are actually conducive for business if you 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.”

Porter's work and thinking for the past 30 years have revolved around what actually happens on-ground - for business leaders, healthcare practitioners and patients, governments and citizens, and social organisations.

Porter was asked if competition is stiffer in Indian business sector and if yes, what should entrepreneurs do to protect their interests?

On this, he promptly replied by saying, “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 his/her competitors are doing he has one-half the battle. Study hard what your competitors are up to & do what your business requires. Don’t copy them blindly. There are global MNC’s which are following this technique along with 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.”

Porter also added in his lecture that he believes that it is time to make a paradigm shift in the public sector companies in India which are not at par with the private sector companies; they should either find the right balance to sustain healthily or divest steadily for the betterment of the economy. He is also researching how “divisive politics is standing in the way of social progress”.