Using Porter's Four Corners Model to analyse competitors

It amazes me how disorganised some companies are, yet they still manage to keep their heads above water. Those who engage with a mentor, business coach, or similar often gain much greater clarity of direction and, whatever the benchmark, production, sales and profits frequently improve significantly.

Getting your own business in order is only the first step. Next, you have to understand what your competitors are doing, especially those who have the edge over you. One useful strategic tool for doing this is Porter's Four Corners Model, developed by Michael Porter.

Michael Porter is a leading authority on business strategy and the Bishop William Lawrence University Professor at Harvard Business School – the highest professional recognition that can be awarded to a Harvard faculty member. His Four Corners Model provides a framework for understanding what may be happening behind a competitor's doors, the strategy they are likely to adopt and the factors that influence their decision-making.

Understanding Porter's Four Corners Model

To begin, imagine a simple 2 × 2 matrix.

Top left: Corner 1 – Drivers (Motivation)
Bottom left: Corner 2 – Assumptions (Motivation)
Top right: Corner 4 – Capabilities (Actions)
Bottom right: Corner 3 – Strategy (Actions)

Each corner helps you build a clearer picture of how a competitor thinks and operates.

Corner 1: Drivers

These are the factors that motivate your competitors.

Ask yourself questions such as:

• What drives them forward?
• What are their values?
• What really makes them tick?

Understanding what motivates a business helps you identify where its energy lies, whether that's financial goals, business philosophy, leadership background or long-term ambition.

Corner 2: Assumptions

This isn't about your assumptions; it's about theirs.

How do they perceive themselves and their competitors, including you?

Consider questions such as:

• How do they assess their own strengths and weaknesses?
• Do they see themselves as market leaders or challengers?
• Are they generally proactive or reactive?
• Do they become defensive or aggressive when competitors move?

Understanding these assumptions helps explain why organisations make the decisions they do.

Corner 3: Strategy

This corner focuses on how your competitors compete in the marketplace.

There may be a difference between their intended strategy, as outlined in annual reports or business plans, and the strategy they actually deliver.

Research can often reveal these differences.

If their current strategy is producing good results, it is reasonable to assume they will continue investing in it. Equally, ask yourself whether there are opportunities for them to improve further or whether gaps are beginning to appear.

Look at areas such as:

• How they create value
• Customer relationships
• Investment priorities
• Market positioning

Corner 4: Capabilities

Finally, consider whether your competitors can deliver their strategy.

They may have the motivation and drive to launch ambitious plans, but can they successfully execute them?

Think about questions such as:

• How might they respond if you begin to increase your market share?
• Would they compete on price?
• Would they increase marketing activity?
• Would they launch new products or services?

As with a SWOT analysis, consider their strengths and weaknesses, including:

• Financial resources
• Leadership capability
• Marketing expertise
• Training and development
• Operational effectiveness
• Putting the Model into Practice

Once you've gathered this information, you can begin analysing your competitors' likely responses to changes in the marketplace.

It's equally valuable to carry out the same exercise for your own organisation. Comparing the two often highlights opportunities, strengths and areas for improvement that may otherwise have been overlooked.

The aim is to develop your strategy using informed analysis rather than guesswork.

Beyond business

Although Porter's Four Corners Model is primarily used within a business context, its principles can also be applied elsewhere.

For example, you might use similar thinking when applying for an internal promotion, competing in sport or analysing any situation where understanding the motivations and likely actions of others is beneficial.

The key message is to understand what drives people, the assumptions they make and how they are likely to respond.

Looking beyond your own perspective often helps you make better decisions.

However, you choose to use this model, it provides an excellent framework for understanding others and creating stronger plans based on knowledge rather than instinct alone.