Prof. Michael Porter, the leading world authority on competitive strategy, spoke today on the implications of the shifting global marketplace and competitiveness in Spain at IESE (University of Navarra).

Addressing some 200 international executives, Porter stated that his relationship with IESE has been the longest and most important of any other business school after Harvard. He congratulated IESE faculty for "building one of the worlds great management schools" and commented that he has learned a lot from IESE faculty, he is proud of the relationship, and "feels among friends."

During the lecture, Porter stressed the need for managers to focus on how their organizations can deliver something unique, stating that "there is no 'best', but rather many ways to add value." He advised companies to keep up-to-date with best practices, although this alone does not constitute a successful competitive strategy. "The worst error in strategy," says Porter, "is for companies to get into a situation where they are competing on the same footing as their competitors. This can only lead to decreased customer choice and less profit."

Porter argues that having full knowledge of the industry in which your company operates allows strategists "to find a position in the industry where the firm can insulate itself from its competitors' forces, knowing which customers you are not going to cater too, and which doors your sales people should be walking past." 

Porter concluded his first lecture with five basic principles of strategic positioning: a unique value proposition compared to other organizations; a tailored value chain; clear trade-offs; a focus on activities that fit together and reinforce each other; and strategic continuity with continual improvements in strategy.

In his second lecture, Porter grappled with the implications of competitiveness within Spain. He argued that "despite tremendous improvements in labor utilization, labor productivity in Spain is negative, making Spain a less competitive choice for investment and thus inhibiting prosperity in the long term."

Looking at ways of increasing productivity, he stated that it can no longer be a top-down process driven solely by governments - private sector and universities also have key roles. "It is surprising how often governments don't understand what the game is," said Porter, "increasing productivity is essentially all that matters. Social conditions cannot be separated from economics, and a productive economy equals a prosperous population."

This requires governments to take specific macroeconomic, legal and political steps in order to create an environment where businesses are confident enough to invest. This relies on a good microeconomic climate within companies, therefore good management is vital. He stressed that the key to increasing productivity is "smart firms plus an appropriate business environment."

With all of these challenges in mind, Porter said he was thrilled and delighted that IESE has created the International Center for Competitiveness. In conclusion, he stated that "unless an independent institution like IESE takes on the responsibility to undertake research in this area, there is a tendency for issues to become clouded by politics. In doing so, IESE is playing a very important role in society."