Michael E. Porter is Professor of Business Administration at Harvard Business School and a leading authority in the field of competition and strategic management. Victor E. Millar worked at Arthur Andersen & Co. when this article was published, he now serves as Chairman of The Columbus Group. This article was published in the July-August 1985 issue of the Harvard Business Review.

In this article the authors aim to help general managers respond to the challenges of the information revolution. The information revolution is affecting competition in three vital ways: (1) it changes industry; (2) it gives companies new ways to outperform their rivals; and (3) it spawns whole new businesses. The authors discuss the strategic significance of information: "Information technology is changing the way companies operate and affects the entire process by which companies create their products." It even reshapes the products themselves. These points are explained by using the value chain. The authors then go on to discuss how information technology changes the nature of competition, building the arguments on Porter's previous work (1980, Competitive Strategy; 1985, Competitive Advantage). "Information technology can alter each of the five competitive forces and, hence, industry attractiveness as well. ... The technology affects value activities themselves or allows companies to gain competitive advantage by exploiting changes in competitive scope." The information revolution has also given birth to completely new industries in three distinct ways: (1) it makes new businesses technologically feasible; (2) it can spawn new businesses by creating derived demand for new products); and (3) it creates new businesses within old ones. So how can senior executives take advantage of these opportunities? Porter and Millar provide five steps which companies can use for successful competition in the age of information. All of the points the authors make are complemented with clear examples, although somewhat dated now.

Although this article was published in the July-August 1985 issue of the Harvard Business Review it is still very relevant, especially with the introduction of the Internet. It explains clearly how information technology affects the value chain and how companies can take advantage of the new opportunities provided by it. I see Porter's 2001-article 'Strategy and the Internet' as a modern-day complement to this article, and taken together these two articles will provide managers and MBA-students with great insights into the strategic use of information technology/IT. The authors use simple US-English.

Hasta los 23 años he llegado sin conocer las experiencias de Michael Porter, al que he descubierto en las clases de Planificación de empresas en la universidad; ¡qué mañanas de bostezos...!

This book is still very applicable in our new economy in disecting competition considering it was written in 1991. The fundementals of this book make it a must read in analyzing one of the "Five Forces".

This book is another attempt to capitalize on a name brand (Porter; Harvard) as opposed to providing a substantive, insightful take on what is happening in Japan and what needs to be done in order to correct certain problems in the Japanese economy. It also gives the false impression that Japan is somehow a pre-mature version of the US. Porter is not a Japan expert and I would be very careful, as an American/foreigner, to not to take books on Japan by foreigners who have never lived their or speak the language too seriously. The book is not about Japan, it is a generalized theoretical black box solution to a much more complex problem in which one needs to understand a lot more than just management theory. Japanese management is much more complex and, unlike in the US where a monkey can be trained to fire people, Japanese managers have many more issues to deal with. People tend to forget the fact that Japanese managers have done a much better job (though moving more slowly) at reducing the negative impact of restructuring. Its more difficult to keep a company going and competitive when its against the law to fire people than if you could fire people on the spot-- US management "expertise" is incredibly over-rated the recent market correction shows the incredible amount of resources that are wasted by corporate America on such things as management consulting. Those foreigners who have written on Japan's economy and financial markets who have the language down (speaking; reading) and have been in-country for an extended period of time as expats can provide a very interesting and highly useful perspective for those looking from the outside in a way most Japanese cannot (and will not). Being a "senior advisor" to a few large Japanese companies does not qualify someone to write on this topic.

Michael Porter is Professor of Business Administration at Harvard Business School and a leading authority on competition and strategic management; Hirotaka Takeuchi is Professor and Dean of the new Graduate School of International Corporate Strategy at Hitotsubashi University in Japan; and Mariko Sakakibara is Assistant Professor at the Graduate School of Management at the University of California, Los Angeles.

"This book aims first and foremost to offer a theory that can explain and interpret Japan's postware economic trajectory." This 'theory' follows a mostly academical and economical research method. In Chapter 1 the authors first discuss Japan's economical history, whereby the authors use extensive graphs, figures and tables to prove their point: "Japan's actual competitive performance, then, has been mixed for decades." Expanding on their discussion on the economical history, the authors challenge the Japanese government model. "At the core of the Japanese government model is a particular conception of the process of economic development and the bases of competitiveness. It embodies an implicit aversion to certain forms of competition and an effort to channel competition in various ways." This model goes back to the early post-World War II period, when "the nation was in shambles". There is an 12 developmental policies list which form the building blocks of the Japanese governmental model. The authors discuss the impact of these policies on Japan's successes and failures.

In Chapter 3, the authors discuss Japan's unique management model. "The model stresses attributes such as teamwork, a long time horizon, and dedication to continuous quality improvement, all of which remain important Japanese strengths. But it has also encouraged conformity and a conception of competition that is dangerously incomplete." Again, the authors introduce a list of policies which are typical for the Japanese corporate model. The authors' biggest complaint is that most Japanese companies do not have a strategy, they tend to compete on operational effectiveness. (For more see Porter's 1996-article 'What is Strategy?')

In Chapter 4 the authors try to explain Japanese competitiveness. This model for competitiveness follows the universal model: "vigorous competition in a supportive business environment, free of government direction, is the only path to economic vitality." Most of this chapter is directly taken from Porter's 1990-book 'The Competitive Advantage of Nations', discussing various industries (both successful and unsuccessful).

In Chapter 5, 6, and 7 the authors aim to come up with an answer to move Japan forward. The authors discuss the requirements for both government and companies. "What is needed is nothing short of a new economic strategy, one that builds on the true bases of Japan's past success, recognizes the differences between the country's rebuilding challenges and its present circumstances, and addresses the realities of modern global competition." So can Japan compete? The authors believe it can. "Japan has a history of competing successfully at the highest level and rapidly advancing national productivity, when competition was allowed to proceed unfettered. ... Japan can compete. To do so, however, it will require the systematic changes in both business and government we have described. ... As it has shown in earlier periods of transition, if mind-sets change, Japan has the capacty to move rapidly."

Yes, I do understand the disappointment of some of the other readers. In line with Michael Porter's 'The Competitive Advantage of Nations' (1990) this book is more about governmental issues than the activities within companies as in Porter's bestsellers 'Competitive Strategy' (1980) and 'Competitive Advantage' (1985). In their search for their answer to the title-question (Can Japan Compete?) the authors use an mostly academical and economical approach, which can be daunting to some readers. The book is mostly aimed at Japanese multinationals, economists, and governmental officials, and includes some strong critical comments toward their policies.

...

Michael Porter become the celebrity in the field of business strategy with his two books, ¡®Competitive Advantage¡¯, ¡®Competitive Strategy¡¯. Takeuchi and Sakakibara secured their name in organizational learning school with their book, ¡®The Knowledge-Creating Company.¡¯ With this book, ¡®the word, ¡®knowledge creation¡¯ has been widely circulated within business schools.
This book poses the question, ¡®Why does Japan stumble?¡¯ it¡¯s the single most popular subject in Japanese studies. Numerous books come to mind on that issue. The approach this book takes is, nonetheless, unique. While others have tackled it in the view of macroeconomics or political economy, authors of this book take the view of microeconomics, or more precisely business strategy. They argue that more-than-decade-long deflation and liquidity trap are not the fundamental problem, but just symptoms. The underlying problem must be hunted for elsewhere: the eroded competitive advantage of Japanese companies. There has been warning signs since 1980s well before bubble bursting:
1.Since 1980s, no new internationally competitive industry has emerged.
2.The profitability, or capital productivity has long been low. Export share has been achieved and maintained partly by sacrificing returns to capital.
3.Japan¡¯s share of world exports peaked in 1986 (10%). But it has fallen since then to below 8%.
Bubble and subsequent financial meltdown certainly is serious trouble. But above reveals much deeper crisis: the loss of competitiveness.
Michael Porter maintains that firms initially gain competitive advantage by altering the basis of competition. They won not just by recognizing new market, or technologies but by moving aggressively to exploit the,. A firm¡¯s local rivalry in home nation plays a critical role in shaping manager¡¯s perceptions about the opportunities that can be exploited. Firms that survive vigorous local competition are often more efficient and innovative. In the 1970s and 80s, Japan set the world standard for operational effectiveness, that is, for improving quality and lowering cost: TQM, JIT system, lean production, cycle time reduction. Japanese companies pushed the productivity frontier well beyond the capabilities of many Western companies. Japanese companies¡¯ competitive advantage was obtained through cut-throat local competition. But starting in the mid- and late 1980s, the gap between Japanese and Western companies began to narrow through so-called restructuring or reengineering. Now Japan¡¯s source of competitiveness has been eroded away. As a result, international competition has ever more vigorously intensified not in the behalf of Japan. Worse, what drove Japan to be competitive now serve as drag on it. Fierce local rivalry degrade into competitive convergence. It means that all the competitors in an industry compete on the same dimension. As rivals imitate one another¡¯s improvements in quality, cycle time, or supplier partnerships, competition becomes a series of unwinnable races down identical paths. This occurs because Japanese firms believe that by mimicking competitors¡¯ technologies and products, they can avoid being in a weak positioning in the market. Because, as a result of mutual benchmarking, Japanese companies cannot but think of competition only in terms of operational effectiveness for their product lineup converges, the have made it almost impossible to be enduringly successful. The more benchmarking, the more they look alike. To avoid such a stalemate, they try to diversify product lineup. But it inflames only to another round of convergence. This kind of local rivalry has finally led to excess costs to over-differentiation for products as well as their components. Such costs have become too high, thus leading to a considerable waste of resources. When they set the best practices, such a cost could be dissipated at the expense of Western competitor¡¯s market share. But now such an advantage rarely exists, if any. Competitive convergence leads to the lack of focus. The lack of focus results in no obvious competitive advantage for they are over-diversified. Authors recommend to compete on strategy: Operational effectiveness is just one of two ways a company pursues superior performance. The other is through strategy, or competing on the basis of a unique positioning involving a distinctive product of service offering. The essence of strategy is to perform differently from rivals. It¡¯s choosing not to do something. They succumb to the temptation to chase easy growth by adding popular features and taking on product lines or services that do not fit their strategy. Or they target new customers to whom the company offers noting unique. But attempting to compete in several ways at once creates confusion and undermines organizational motivation and focus. Profits fall, so more revenue is seen as the answer. In sum, authors argues that the problem of Japan is more in mind-set than in unchangeable circumstances in Japan.

Good for research but not exactly coffee-table blurb.