Understanding Michael Porter The Essential Guide to Competition and Strategy
This week’s reading was about competitive advantage and profit and loss. I have always viewed competitive advantage as being what you or your company did better than everyone else that set you apart. According to the book, it is about creating superior value. It’s about operating at a lower cost or demanding a higher price to demand the most profit.
When trying to determine or measure competitive advantage you must compare it to like companies within the same industry. Compare companies that face the same five forces in the same industry. To truly understand the competitive advantage you must understand the activities that your company performs. These activities include producing, designing, selling and delivering. These are all part of the value chain. The value chain is how you create value in your product from start to customer or consumer. You look at each step in the value chain as adding value to the final product. The way your company looks at these steps is what can set you apart from your competitors. You may be able to perform a step the same as the competitor at a cheaper price or do the step better at the same price. Porter refers to performing a task better than your rivals operational effectiveness.
The company’s value chain is all of its value-creating and cost-generating activities. These activities are the basic units of competitive advantage. As we look at our own business, it is important to examine all the activities and possibly do them differently than our rivals, do them cheaper than our rivals, demand a higher price than our rivals, and be unique.
Magretta, J. (2012). Understanding Michael Porter: the essential guide to competition and strategy. Boston, Mass: Harvard Business Review Press.
Understanding Michael Porter The Essential Guide to Competition and Strategy
The main take away that I have from chapter one of this book is that strategic competition means choosing a path that is different from the others. Instead of trying to be the best, companies should be competing to be unique. Uniqueness in the value you create for your business can give you a competitive edge. According to Michael Porter, the right mindset for the competition is to earn higher returns, profits, meet the diverse needs of your customers and compete by innovation.
Porter’s five forces:
Rivalry among existing competitors
The threat of new entrants
Bargaining power of buyers
The threat of substitute products or services
Bargaining power of suppliers
These five forces tell you immediately how the industry works and how it creates and shares values. It explains the industry’s profitability. I find this true in my research of the hemp industry. As I work on my situational analysis, I find that Porter’s five forces will help me realize the profit potential in this industry. As we all know, profit is important.
Magretta, J. (2012). Understanding Michael Porter: the essential guide to competition and strategy. Boston, Mass: Harvard Business Review Press.
If you are in business, marketing research is an essential part of being successful. If we do not know who are target market customers are, we will not know how to reach them. We also need to realize why we are doing the marketing research. Do you want to understand your customer better? If we understand what products our customers prefer and why the purchase, we can market better to them? If you are having problems with your business or product, market research can uncover these issues and allow you to fix them and have a strategy to recover.
Part I of this book outlines the Stages of Research.
Stage 1: Identify the problem
Ascertain your objectives
Understand the problem background
Isolate/Identify the problem not the symptoms
Determine the unit of analysis
Determine relevant things to ask about
Translate marketing problem into researchable objectives
Stage 2: Designing the study
Types of questions
Data source
Can you get accurate answers by simply asking people?
How quickly is the information needed?
How should survey questions be worded?
How many questions should be asked?
Stage 3: Selecting a Sample
Is the sample necessary?
Can the target population by identified?
How accurate must the sample be?
Stage 4: Gathering the data
Who will gather the data?
How long with it take to gather the data?
Stage 5: Analyzing the results
Will standard editing and coding be used?
How will data be categorized?
What data analysis software will be used?
Stage 6: Communicating the findings
Who will read the report?
Will presentations be required?
What format will the report be in?
As you can see, there is much to consider when creating marketing research for your business. These are just a few of the questions you must ask yourself as you journey through the stages of market research. We must also consider the cost, time-frame and our abilities when creating our market research plan. I look forward to reading more in this book. Stay tuned as I will be back with more information from the Market Research Kit for Dummies.
Hyman, M. R., & Sierra, J. J. (2010). Marketing research kit for dummies. Hoboken, NJ: Wiley.
I love all Progressive Insurance commercials. I think that this commercial entitled “Elk Country” is very funny. This ad aired in 2019. The ad was created by Arnold Worldwide. The chief creative officer is Icaro Doria. One of the main reasons to have a commercial is to entice the consumer to listen to it and remember your business. In this case, Karen’s camper sewage tank is spewing all over her camper. She is screaming and they compare it to a bull elk.
The commercial successfully tells what the company does. You will remember it because the commercial is so off the wall. While there is no time frame on this ad, the ad encourages you to call today. This ad also emphasizes that Progressive will cover even the strangest claims. Since there was not a time frame, measuring the success of this ad through sales might be difficult.
The target customer for this ad would be outdoor travelers. I think this ad would appeal to campers and travelers. I also think that the uniqueness of the ad will bring brand awareness to all.
The ad encourages you to call today to get insurance from Progressive Insurance. I interpret the ad as insurance that covers the unexpected. If you get Progressive Insurance you will not have to worry about paying to fix the crazy, odd events that can come your way.
This ad was created by The Richards Group and won the Best Radio Commercial 2019. It is a funny take on the current trend of vocal fry. Tom Bodett is the famous Motel 6 voice in the commercial. The writers of this commercial were Wendy Mayes and Chris Smith. This commercial, like all of Motel 6 commercials emphasize the low price and the availability.
The target customer for this ad is someone looking for a place to stay at a low price. The ad is consistent with the usual Motel 6 ads. The ads mention the low price and that they will leave the light on for you.
This ad is for Herrmann Services which provides services for heating, AC, electric or plumbing. In 30 seconds this commercial is quick to tell you that whether you have a pipe burst or problems with your heating or cooling you can call “her man”.
The target market for this commercial is anyone that does not have the skills to do the repairs. You would think that the target market is women but Audrey is trying to tell the narrator that her husband can’t do the repairs. This radio ad even supplies the number and website for easy contact.
The value proposition of this ad is the service that can be provided by this company. This company can handle multiple household problems. In addition to being effective in getting you to listen to it with its catchy spin on the name, you have the companies telephone number and website address by the end.
This commercial was awarded the Best Radio Station Commercial and was produced by Hubbard Radio Cincinnati.
This ad features a catchy song. The song is about the tolls and turmoil of a trash bag. It is funny and makes you think of possible accidents you could have with a subpar garbage bag. I think the objective of this ad is to get you thinking of the quality of the Glad garbage bag. The song emphasizes the new features which are Odor Shield and Force Flex. This ad’s target market would be broad. This bag would be for anyone that wants a great smelling bag that is durable against tearing. The ad even mentions recycling. I think that this ad would have you seeking out this bag at the retailer. The value proposition on this bag is made clear by the commercial, durable and odor resistant.
This ad won the Best Student Produced Spot award given by Radio Mercury Awards 2019. It was created by the Miami Ad School.
This quick 30-second ad won the Best Radio Station Commercial. It was created by Entercom communications. The product featured in this ad is pest control. The ad gives you an image of a raccoon in the attic eating your wiring. I think it is funny, but it could provoke fear in some people. The company that is being advertised is Allied Termite and Pest. This ad aired in 2018. This ad is designed to quickly give you an image of one of the problems this company could solve for you. I think the ad is designed to get you to call immediately because the telephone number is supplied. The ad is memorable enough that you would possibly remember the company and call later. The target market for this ad would be people that do not have the expertise to catch wild animals or pests. This ad may be short but the value proposition is clear. This company offers quality professional skilled technicians for pest removal.
As I wind up my review of this book, I reflect on the general theme to be a strong CEO and not give up. This weeks reading discusses evaluating the CEO. Being a CEO requires a varied set of advanced skills. Some of these skills come naturally and some are learned. When evaluating a CEO, you want to ask the following questions:
Does the CEO know what to do? This includes matters of personnel, financing, goals, and marketing.
Can the CEO get the company to do what she knows? Can she lead her company to execute her strategy? One of my favorite passages in the book was this paragraph.
“In a well-run organization, people can focus on their work (as opposed to politics and bureaucratic procedures) and have confidence that if they get their work done, good things will happen both for the company and for them personally. By Contrast, in a poorly run organization, people spend much of their time fighting organizational boundaries and broken processes.”(Harowitz, 2014)
The CEO must be help accountable. The CEOs position is constantly evolving with the change of the economy and the size of the company. There are so many factors that can change the company so the CEO may have to change with it.
Horowitz, Ben. The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers. , 2014. Print.
Ben Horowitz writes of the hardest things about being a CEO. He said that the most difficult thing is to manage your own psychology. He says that hiring, firing, product and organization design are straightforward skills.
One problem is that to learn to be a CEO, you have to be a CEO. No amount of training prepares you for the job. Even if you know what you are doing things will go wrong. As CEO, you will feel responsible for everything and anything that will go wrong will be your fault. A mistake that most CEOs make is taking things too personally or not taking things personally enough. According to Harowitz, a CEO will be urgent yet not insane. They will move aggressively and decisively without feeling emotionally culpable. They will need to separate the importance of the issues with how they feel about the issue. The author advises that to calm your nerves as a CEO, you should get some friends, put your thoughts on paper not carry them around in your head, and focus on the road, not the wall. Don’t focus constantly on what can go wrong. Focus on where the company is going rather than what you hope to avoid. Many times CEOs feel like quitting. Many have trouble with not sleeping, drinking, and stress. Harowitz says most CEOs have different strategic moves but most just say “I didn’t quit”.
Harowitz explains that there are two kinds of CEOs. He labels them as ones and twos. The ones spend time gathering information, love making decisions, but get bored with the important execution details of running a company. The twos love making the company run well. They insist on super clear goals and love action. Big decisions worry twos more that ones. The best CEOs have a combination of traits for ones and twos.
The author points out that there is no perfect CEO. The most important attribute is leadership. Three key traits of a leader are the ability to articulate the vision, the right kind of ambition, and the ability to achieve the vision.
Horowitz, B. (2014). The hard thing about hard things: Building a business when there are no easy answers.
Good management is key to running a successful business. As a CEO, Manager or business owner you do not want to get caught up in office politics. Some managers do not even realize that they are guilty of it. They have an employee come to them soliciting a raise. They end up giving this employee a raise to keep them from leaving only to have others hear about it and do the same thing. The only employees left out might be your best employees. Ben Horowitz spells out his two key techniques for minimizing politics.
Hire people with the right kind of ambition. The right kind of ambition is an ambition for the company’s success with the employee’s success coming as a by-product of the company’s victory.
Build strict processes for potentially political issues and do not deviate. These activities include:
Performance evaluation and compensation
Organizational design and territory
Promotions
Horowitz advises to carefully word job titles and manage promotion. He suggests defining a formal process for all promotions. Have a promotions council, make promotions unilateral, and compare the employee with both the level’s skill description and other employees to determine whether to approve the promotion.
The author sums it up perfectly. If you structure things properly, nobody other than you will spend much time thinking about titles other than an employee of the month (Harowitz, 2014).
Horowitz, B. (2014). The hard thing about hard things: Building a business when there are no easy answers.
This weeks reading started with the fact that companies justify their employees leaving by saying that they were going to fire them anyway. The company hired them and they were great. How did they suddenly become a bad employee? Most times they do not. Many times the company fails to train them or inform them of their expectations.
Being a good place to work is only the beginning for a company. It is crucial to train your employees in all levels of the company. Training will increase productivity, performance management (setting expectations), product quality and employee retention. We all have probably worked somewhere you are not properly trained. Not being trained can lead to a very poor work environment. The training will build confidence in the employee which will spill over to your customers and products.
Training starts with Manager training. The manager needs to know their expectations. Managers should be held responsible for the training of their team. The team will respect the managers if they take the time to train them and let their expectations be known. Better training leads the company to better performance, product quality and better employees. If you wont your company to be successful, your employees must be successful.
This weeks reading included the difficult things that a CEO or Entrepreneur may go through. These include the struggles, having to tell it like it is, laying employees off, firing an executive, and demoting employees when things fall apart.
Horowitz’s answers to overcoming the “Struggle” include not putting everything on your own shoulders. He encourages you to get the maximum number of brains on your problems even if the problems represent existential threats. Second, understand that your business can be extremely complex, business is like chess there is always a move. Third, Play long enough and you might get lucky. Things can be going dead wrong and if you make it long enough to see tomorrow, it may bring you the answer that seems impossible today. Fourth, Don’t take it personally. Finally, Remember that this is what separates the women from the girls. If you want to be great, accept the challenge.
Mr. Horowitz’s thoughts on laying employees off. You should not delay telling your staff that there are going to be layoffs. It is better that they hear it from you. Be honest. Train your managers on the proper things to say. Assure your employees that it is a company failure, not an employee failure. Be prepared to offer employees benefits and support.
Firing an executive, the person that you have many times searched months for to carry out your mission at the company, is usually not because of incompetence or laziness. It is probably you, the one that hired them, that blew it. You possibly did a poor job defining the position, you hired for their lack of weakness instead of their strengths, or you possible failed to integrate the executive into your company. You prepare when firing an executive: be clear on your reasons, use decisive language, and have their severance package ready. You will then have to inform the company being careful not to damage the reputation of the employee.
Harowitz includes a section on how to demote a friend. I am sure he included this because of a personal experience. In my experience, this is a very hard thing to do. Unfortunately, you have to look at the good of the whole company over the good of your friend. While your friend will be embarrassed and feel betrayed, you have to decide what is your friends best role in the company. When demoting a friend, you must be honest. Many times your are not telling them what they want to hear. You have to admit reality while acknowledging their contributions to the company. Harowitz also suggests when demoting include and increase in compensation to let them know they are still valued. Now that is a tactic I have never witnessed.
This weeks reading was intense but informative. I find it interesting that he always uses the pronoun her or she when referring to the CEO. I am going to try to figure that one out.
