`Profit-based growth wiser than increasing size of companies`

Companies need to focus on producing financial results rather than on corporate expansion, Michael Porter, a professor at Harvard Business School, said yesterday.

Porter, touted as a leading authority on competitive strategy, offered the advice during his presentation on "competition" at a forum in Seoul.

He suggested that companies should be concerned with raising their profitability compared to their invented capital throughout a period of more than three to five years. He then expressed an unfavorable view towards the notion of "shareholder value."



Such an opinion suggests that market conditions will not be as favorable as before in the corporate sector. Porter said the crisis left a big chasm in the global economy, noting that consumption will stagnate with an aging population and that it will be difficult for global economic growth to return to pre-crisis levels.

Porter said he believed the days when businesses enjoyed growth due to a robust economy are over for companies. He stressed the need for a strategic approach based on creativity and differentiation in order to generate financial results.

Citing an unfavorable characteristic of Korean firms, Porter criticized they are inclined to be too focused on market share. He stressed that drawing up corporate strategies on par with a company`s market position should come first, as the befitting market share would come about naturally.

As expert in management and economics, Porter`s work covers three broad areas: competition and company strategy (five forces, value chain), competition and economic development (clusters, diamond model), and competition and societal issues, such as health care and environment.

(sohjung@heraldm.com)



By Yoo Soh-jung