What is the Porter Four Corners Model?

Porter Four Corners Model

Porter’s Four Corners model is a Strategic Tool that analyzes Competitors.

 

Unlike other Strategic Tools, this model only Focuses on Competitors.

  • And try to predict  what they will do in the future.

 

To do that, this model uses 4 metrics (called corners) classified into 2 categories:

  • Motivations.
  • Actions.

The Four Corners

Motivations:

  • 1. Drivers: What is the Competitor looking for?
    • Goals, Intentions, etc.
  • 2. Management Assumptions: What is the Competitor taking for granted?
    • How the Competitor perceives itself vs the reality.

 

Actions:

  • 3. Strategy: How the Competitor is achieving its Goals.
    • Performance, Decisions taken, etc.
  • 4. Capabilities: What resources the Competitor has.
    • Is the Competitor using its Resources efficiently?

 

Let’s now see a Real example so that you understand it better:

Porter's Four Corners example

 

The battle fought by Pepsi and Coca-Cola in the 20th century is legendary.

  • Many people think that, the fight was only for the Cola-flavored drinks… And that is not true.

 

Let’s imagine what Pepsi could have thought about Coca-Cola’s strategy:

  • Drivers: Coca-Cola wants to be the most popular drink in the world.
  • Management Assumptions: They assume that they are way ahead their competitors.
  • Strategy: Coca-Cola is associating its name to “Happiness”, Christmas, etc.
  • Capabilities: They have the best Supply Chain in the world for drinks.

 

What will Coca-Cola do? (according to Pepsi)

  • They will continue to spread their powerful brand on 5 continents.

 

Porter’s four corners example – Pepsi vs Coca-Cola.

 

What did Pepsi do?

 

PepsiCo focused on other products:

  • Snacks.
  • Other beverages.
  • Breakfast products.
  • etc.

 

They attacked the niches that Coca-Cola ignored.

 

Result

 

Coca-Cola is much more popular that Pepsi… But PepsiCo is bigger than Coca-Cola Company.

  • PepsiCo annual revenue: 67 billion USD (2019).
  • Coca-Cola annual revenue:  37 billion USD (2019).

This tool can be a bit controversial because it only focuses on Competitors.

 

Why is this controversial?

  • Because if you focus too much on who is in front of you, you will never be the first.

 

Then, why should you use it?

Why are the Four Corners Important?

Because not all companies can afford not to think about their Competitors.

  • Even Pepsi had a Competitor to beat.

 

Sometimes the best way to design a strategy is to Imitate or Get ahead of a Competitor.

 

In addition, this Tool can complement other strategic tools that only focus on internal factors.

Then… This tool should only be used if you have a Competitor to beat?

 

Not exactly.

 

Now, we’ll explain you when you should use the Four Corners model.

When should you use Porter's Four Corners?

We recommend using this model in the following situations:

  • When the Market is driven by a large Company that sets the pace for the others.
  • When you are able to do what a Competitor does, but better.
  • When there is a Competitor who is “hot on your heels”.
  • When the market is so saturated that the only way to grow is by replacing the competition.

 

However, as you may already know (if you read Consuunt regularly) we always recommend focusing on your Customers First.

  • Sometimes, it is interesting to analyze the Competence, of course but,  in our experience, we don’t recommend to get obsessed over it.

 

The only obsession that guarantees success is obsessing over the satisfaction of your Clients.

 

Now, let’s see some examples:

Porter's Four Corners examples

Now we will share some examples about big and famous companies that “fought” each other for years.

  • Their struggle can teach us different lessons.

 

Let’s begin:

Apple vs Microsoft - Porter's Four corners example

 

Apple and Microsoft… Two super Titans.

It has been a curious battle because, for many years, Microsoft went ahead of Apple but, finally, Apple overtook Microsoft.

 

What would the Four Corners of Microsoft have been like?

  • Drivers: Be the World leader in Software systems.
  • Management Assumptions: They assume they can copy or improve any competitor.
  • Strategy: They offer their software pre-installed to hardware companies.
  • Capabilities: They have the best programmers and also, they can buy any competitor.

 

What will Microsoft do? (according to Apple)

  • They will continue to expand their presence in the Software market.
    • Either they have the best programs, or they can purchase any competitor they want.

 

Porter’s four corners example – Apple vs Microsoft.

 

What did Apple do?

 

  • They focused on their own Hardware systems.
  • They also created their own Software environment.
  • They diversified their products: mp3 players, tablets, laptops… and Phones.

 

This strategy didn’t work very good for many yearsUntil they presented their iPhone to the world.

 

Result

 

At the moment we write this:

  • Apple’s revenue is 260 billion USD.
  • Microsoft’s revenue is 143 billion USD.

 

* However, we have to mention that, we consider Microsoft a much more stable company than Apple is.

  • Microsoft has a highly diversified revenue, while Apple depends on one single product: the iPhone.
    • The iPhone represents the 55% of total Apple’s revenues.
      • If I were a major shareholder in Apple… I’d be very worried.

Burger King vs McDonald's - Porter's Four corners example

 

Now, we will talk about a very “delicious” battle (maybe not healthy, but delicious):

  • Burger King vs McDonalds.

 

As you may already know, McDonalds is the epitome of “fast food”:

  • The first fast food chain that was successful around the world.

 

But Burger King also wanted a “piece of this cake” (or rather, a hamburger?).

 

What would McDonald’s four-corner model have looked like?

  • Drivers: McDonald’s wants to bring their “funny place, funny food” concept everywhere.
  • Management Assumptions: They rely on their preparation processes and ingredients.
  • Strategy: They target families and Children.
  • Capabilities: They create comfortable restaurants and “addictive” food.

 

What will McDonald’s do? (according to Burger king)

  • They will focus on families, especially children.

 

Porter’s four corners example – McDonald’s vs Burger King.

 

What did Burger King do?

 

As McDonald’s focused on attracting families, Burger King focused more on the taste.

  • In fact, their motto is: Taste is King.

 

Result

 

Burger King has not surpassed McDonald’s, but they have taken a well deserved second place.

  • Perhaps, there are other food chains that have higher income but, it is fair to say that, after McDonald’s, Burger King can be considered to be the most popular fast food chain in the world.

 

* Pepsi also followed this same “taste” approach for a few years but, they realized that people love Coca-Cola not because of its taste, but because of the strong bond between the customer and the brand.

Adidas vs Nike - Porter's Four Corners example

 

In this example we’ll talk about 2  of the most influential clothing companies in the world:

  • Nike and Adidas.

These two companies are the absolute reference for sportswear and accessories.

 

Even though Adidas was founded much before Nike, Nike is considered to be the sports brand par excellence.

  • Adidas was founded in 1949 and Nike in 1964.

 

Let’s imagine what Adidas could have studied about Nike:

  • Drivers: Their Objective is to be synonymous with sporting excellence.
  • Management Assumptions: They have an unbeatable Marketing Strategy.
  • Strategy: They hire Sports Superstars that influence their Customers.
  • Capabilities: They have a good reputation and very good contacts.

 

What will Nike do? (according to Adidas)

  • Nike will hire more Sports Superstars from around the world.

 

Porter’s four corners example – Nike vs Adidas.

 

What did Adidas do?

 

Adidas focused more on casual sportswear.

They wanted to be associated to high quality sportswear that can be worn everyday.

  • Hoodies, Sneakers, etc.

 

Moreover, they also “hired” Superstars for promoting their clothes…

  • … But giving special attention to Celebrities.
    • Such as Katy Perry, Kendall Jenner or Jay-Z.

 

Result

 

Adidas is one of the world’s leading casual sportswear company.

  • It is difficult to pinpoint the leader brand because… What differentiates casual sportswear from non-casual ones?

Summarizing

Porter’s Four Corners model is a Strategic Tool that analyzes Competitors and predicts  what they will do in the future.

 

This model uses 4 metrics classified into different 2 categories:

Motivations:

  • 1. Drivers: What is the Competitor looking for?
  • 2. Management Assumptions: What is the Competitor taking for granted?

Actions:

  • 3. Strategy: How the Competitor is achieving its Goals.
  • 4. Capabilities: What resources the Competitor has.

 

We recommend using this model in the following situations:

  • When the Market is driven by a large Company that sets the pace for the others.
  • When you are able to do what a Competitor does, but better.
  • When there is a Competitor who is hot on your heels.
  • When the market is so saturated that the only way to grow is by replacing the competition.

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