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High Quality vs Low-Cost Bargain: The Current Dichotomy! (VI). Unsolved issues of the National Competitive Advantage Theory (Part D).

Today we will cover the last 4 issues from a philosophic point of view, about Porter’s National Competitive Advantage Theory (NCAT). Next week we will continue with our outline next subject, the number (4), Evolution of Global Markets: Where do we stand now.


Alors, let´s begin.

9. Any theoretical model in terms of strategy is subject to perish if it doesn´t include ethics and humanity at the core. What takes my attention is that history has proven to us, whenever we forget the integral humanity in our frameworks, all our endeavors are destined to fail. If we don´t adjust or ameliorate or change Porter´s frameworks for our future business and corporate strategy designs, I am convinced (not just by heart) but in deeds and evidence from history, that the whole business economy that works under the premises of NCAT, 5 Forces model, Value Chain, etc, are destined to fail. How could it be that we have used corporate and business strategy frameworks of analysis without considering the whole spectrum of economic theories that include human beings’ integral prosperity at the core, instead of only our industries?

10. The NCAT framework comes from an industry analysis background, why did it ended as a trade theory?. The NCAT was born particularly from a specific branch of economics called “industrial organization”. Porter´s thoughts about how industries compete evolved and turned to be a corporate and business strategy model (from competitive advantage to corporate strategy). Also, Porter created the value chain analysis, the 5 forces competitive model, and generic strategies, which were adopted by everyone and everywhere when we land to make a business strategy. And to teach business strategy. I believe that every creation from Porter was destined to be under the field of strategic management, never as a trade economics theory. But a reality check is that business affects everything, and Porter´s legacy has been implemented. And its results have overwhelmed us. Nothing else done by the rest of the economists (including Nobel prize economy recipients) has affected our trade planet more than Porter’s models since the 1980s. Porter´s legacy as well implemented by every single industry that performs business trading of products and services, is now used as a generalization of an economic theory. And, believe me, just buy an international business and trade business book, from undergraduate to doctorate, and you will always find his NCAT, or Porter´s supply chain or his elements of industry structure 5 forces, or his cost leadership vs differentiation generic strategies. Porter´s frameworks in reality are above any other economist frameworks on earth that you could name. And all his ideas, in reality, have been established as a core inherent constituent to what happens in real trade. How could it be that a particular framework designed under the “industrial organization” branch of thought, is now, our “savoir-faire” in global trade economic theory.?

11. One school of strategy took the world in less than 30 years. Strategic management is defined as a sub-discipline of business management. By the time I was graduating from Cornell (1999), “business management” as science was only 85 years old. Frederick Taylor (1911) and Henri Fayol (1916) were the pioneers of positioning “business” under the “scientific management” perspective. Many economists always laughed about “business” as a science. But, Porter´s NCAT and the rest of his frameworks, were pushed out of industry organization economics and put in the core center of “strategic management”, a subject that provided fertile soils to expand into all the MBAs, or anyone who studied business since then. How could it be that one point of view (or one school of strategy) invaded the business world leaving the rest of strategy theories or other strategy frameworks?

12. Porter´s “strategy school of thought” has always been based on hard data analysis. “Porter, in fact, claimed in a 1987 article in The Economist magazine that “I favor a set of analytic techniques to develop strategy”. The rest of strategists from Porter´s age, critiqued Porter´s views, because “they knew that there are dangers in looking to the future by extrapolating the trends of the present; in relying excessively on hard data and in over-formalizing the strategy-making process”. Gary Hamel, stated in 1997: “Opportunities for innovative strategy don´t emerge from sterile analysis and number crunching – they emerge from novel experiences that can create opportunities for novel insights”. Numbers and data are just one piece of the cake of strategy theories (Eleonora Escalante Strategy always reduces data analysis to no more than 20% of any research or study). Other top strategist gurus, as Mintzberg, Ahlstrand, and Lampel, wrote a book, “Strategy Safari”, to light our minds, and guide us through more than 10 strategy schools of thought, so we (consultants, strategy professors, and researchers) could be aware to teach that Porter´models was not the only “one” recipe for success. How could it be that the business world (particularly MNCs) adopted only one way to do corporate and business strategy during the last 30 years?

“Surprised by un petit squirrel”. Original artwork in watercolor. Handmade with love by Eleonora Escalante. Size: 22 inches x 15 inches.

Ok. We have finished this subject. There are more critiques and limitations of Porter´s NCAT. Again, I repeat it. There is no intention to hurt Porter´s work. His contributions are evident. Companies that have grown and create economic shareholder value based on Porter´s works are real. I am sure Porter has done his best, he has helped to create wealth. But sadly, trade is now imbalanced. And it is beginning to destroy the domestic Middle-Class, in countries where you don´t expect it to happen. Through all these years shareholders have benefited from Porter´s models. All I wish is to shake the “industry of strategy” that relies upon strategy professors or Ph.D. business researchers or consultants. I also wish to help the new generation of economists that are currently running to create the new economic theories of thought, to please consider all these issues. Business matters, and economists have to work hand in hand with strategists (practitioners and academics). So you can see and perceive the importance of business as a science inside the economic theories. Just watch Porter´s models running everywhere. Economics can´t continue ignoring “business as a science”. Every one of us (from poor to rich) works for, in, or around business (regardless if we work for profit or not). Our future belongs to those who do not conform to continue making mistakes based on our biased or partial theories, or based only on hard-data or disruptive technologies, or based on constant improvement of operational effectiveness, or shareholders profitability. Our future valiantly will ameliorate, if we are committed to open our eyes in an integral way.

The reason why I have always wished to study a Ph.D. in business (strategy and economics) is that I want to help this world to be a better place. My brain has so much to contribute, regardless of that I am from Generation X. May God grant me to do it, someday with you Alex Guillermo Lozano Artolachipi.

I will stop here. See you next week. Thank you for reading to me.

Sources of reference cited or used today:

Disclaimer: Illustrations in Watercolor are painted by Eleonora Escalante. Other types of illustrations or videos (which are not mine) are used for educational purposes ONLY.  Nevertheless, the majority of the pictures, images, or videos shown on this blog are not mine.  I do not own any of the lovely photos or images posted unless otherwise stated.

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