In an article entitled “Strategy and the Internet” published in the March 2001 edition of the
Harvard Business Review,
Michael Porter outlined six principles that he believes companies need to follow if they want to establish and maintain a distinctive strategic position in the market place.
Since the internet is a business platform with low barriers to entry, these six strategic principles are particularly relevant to any company that wants to be profitable online:
1. Stand for something
In order for a company to develop unique skills, build the right assets, and establish a strong reputation it is important to define what the company stands for so that the company will have continuity of direction.
2. Focus on profitability
This point seems obvious, however many internet based companies have instead focused on “unique visitors” and “page views” as measures of performance. At the end of the day, sustainable profits will only be possible where goods or services can be provided at a price which exceeds the cost of production.
3. Offer consumers a unique set of benefits
Good strategy involves being able to provide a distinct set of benefits to a particular group of consumers. Trying to please every consumer will not give a company a sustainable competitive advantage.
4. Perform core activities differently
If a company is able to establish a distinctive
value chain by performing key activities differently from its competitors, then this will help the company establish a sustainable competitive advantage.
5. Specialise
There is no competitive advantage to being a jack of all trades and a master of none. Porter recommends making trade-offs. By focusing on certain activities, services or products at the expense of others a company can establish a unique strategic position.
6. Ensure that all activities reinforce the company’s strategy
All of a company’s activities are
interdependent and, as a result, they must be coordinated so as to reinforce the company’s overall strategy. A company’s product design, for example, will affect the manufacturing process and the way that products are marketed. By coordinating all of its activities, a company makes it harder for competitors to imitate its strategy.
