Porter's four corners model

Porter's four corners model is a predictive tool designed by Michael Porter that helps in determining a competitor's course of action. Unlike other predictive models which predominantly rely on a firm's current strategy and capabilities to determine future strategy, Porter's model additionally calls for an understanding of what motivates the competitor. This added dimension of understanding a competitor's internal culture, value system, mindset, and assumptions helps in determining a much more accurate and realistic reading of a competitor's possible reactions in a given situation.

This helps in determining competitor's action by understanding their goals (both strategic and tactical) and their current position vis-à-vis their goals. A wide gap between the two could mean the competitor is highly likely to react to any external threat that comes in its way, whereas a narrower gap is likely to produce a defensive strategy. The question to be answered here is: What is it that drives the competitor? These drivers can be at various levels and dimensions and can provide insights into future goals.

The perceptions and the competitor has about itself and its industry would shape strategy. This corner includes determining the competitor's perception of its strengths and weaknesses, organization culture and their beliefs about competitor's goals. If the competitor thinks highly of its competition and has a fair sense of industry forces, it is likely to be ready with plans to counter any threats to its position. On the other hand, a competitor who has a misplaced understanding of industry forces is not very likely to respond to a potential attack. The question to be answered here is: What are competitor's assumption about the industry, the competition and its own capabilities?

A competitor's strategy determines how it competes in the market. However, there could be a difference between the company's intended strategy (as stated in the annual report and interviews) and its realized strategy (as is evident in its acquisitions, new product development, etc.). It is therefore important here to determine the competitor's realized strategy and how they are actually performing. If current strategy is yielding satisfactory results, it is safe to assume that the competitor is likely to continue to operate in the same way. The questions to be answered here are: What is the competitor actually doing and how successful is it in implementing its current strategy?

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