HTML Preview Real Estate Competitor Analysis page number 1.
Professor Michael E. Porter
Harvard Business School
Copyright 1989 Michael E. Porter
COMPETITIVE STRATEGY AND REAL ESTATE DEVELOPMENT
REMARKS TO THE 1989 HARVARD BUSINESS SCHOOL REAL ESTATE SYMPOSIUM
1
The real estate industry is an industry in which many of you will have to make some
choices about how you will compete in the future. Past modes of behavior probably will not
carry you through the next decade. The questions are how do you think about the question of
strategy for your business and how do you do that in a constructive way.
In looking at any industry, whether it is real estate or whether it is making widgets,
there are two basic questions that each of you has to answer if you are going to develop an
effective strategy.
The first question has to do with what’s going on in the industry itself. Industries
differ dramatically in their profit potential and their profit potential changes over time. You
have to understand this because there is something about the game in which you are playing
that is going to determine how successful you are going to be. There are some games that are
good to play in and some games that are not good games to play in.
When I talk about the word industry, there is going to be a tendency for the people in
this room to think of real estate. But that’s not what I mean. Real estate isn’t an industry.
It’s a whole sector of the economy. It is composed of many distinct businesses, each of
which is an industry. So developing shopping malls, putting up prime downtown
commercial space, and brokerage are all industries. Each of these industries has a different
economic logic. Each of them is different in terms of its fundamental attractiveness. You’ve
got to understand how attractive the industries are in which you are competing and you have
to understand how they are likely to change over time. Hopefully, your job is not only to
compete in a way that is going to improve your position but also that will make your industry
better.
The second basic question in strategy has to do with your position within the industry.
No matter where you are operating, you are going to have to decide exactly how your
company is going to compete and how you are going to position your company to be a
superior performer.
What we see from looking at every industry is that, no matter how attractive or
unattractive an industry is, some companies do a lot better than others, year in and year out,
because they have found exactly the right position. One of the most profitable companies in
the United States in the last decade has been a steel company. It’s in a lousy industry but it’s
in just the right position.
1
This presentation was delivered to a group of leading real estate executives who convened at Harvard Business
School in December 1989. The presentation’s analysis of the emerging changes in real estate proved to
correspond well with actual events, and the same principles remain important today. In the current real estate
downturn, these principles are especially timely. June 2002.