National Competitiveness in Global Economy

7/28/2019 National Competitiveness in Global Economy

1/14

National Competitiveness

in Global Economy


2/14

MICHAEL PORTEROriginator of the

THEORY OF NATIONAL COMPETITIVE

ADVANTAGE


3/14

Michael Porters Theory of National

Competitive Advantage/Porters

Diamondpublished in 1990 was based ona study of 100 firms in 10 developed

nations

Porter questions how Switzerland and

Japan could become success stories

without assumed prerequisits


4/14

FACTORS, which MICHAEL PORTER BELIEVED

EXTENDED BEYOND NATURAL ENDOWMENT,

INCLUDE. a sizeable demand from sophisticated

consumers,

an educated and skilled workforce,

intense competition in the industry

the existence of related and supporting

suppliers


5/14

Porter also discusses external influences such asgovernment and chance demand conditions:

A company facing a more competitive environment willstrive to make itself more efficient

Factors of production are nothing more than the inputsto compete in any industry, such as Labour, arable land,natural resources, capital, and infrastructure

These are clearly important but PORTER now believesthey are less vital to success than before.


6/14

Factors most important to competitive

advantage in most industries, especially in

the industries most vital to productivity

growth in advanced economies, are not

inherited but are created within a nation,

through processes that differ widely acrossnations and among industries


7/14

Porters diamond framework

Government

Chance

Structure of

Firms and

Rivalry

Related and

Supporting

Industries

Demand

Conditions

Factor

Conditions

Adapted from Michael E. Porter, The Competitive Advantage of Nations

(New York,: Free Press, 1990, pg. 72)


8/14

These include:1. the quantity, skills, and cost of the personnel;

2. the abundance, quality, accessibility, and cost of the nations

physical resources such as land water, mineral deposit, timber,

hydroelectric power and fishing grounds;

3. the nations stock of knowledge resources, including scientific,

technical, and market knowledge that affect the quantity and

quality of goods and services;

4. the amount and cost of capital resources that are available to

finance industry;5. the type, quality, and user cost of the infrastructure, including

the nations transportation system, communications system,

healt-care system, and other factors that directly affect the

quality of life in the country.

Factor conditions


9/14

Demand conditions

These include:

1. the composition in the home markets as reflected by the

various market niches that exists and buyersophistications

2. the size and growth rate of the home demand;

3. the ways through which domestic demand is

internationalized and pulls a nations products andservices abroad


10/14

Related and supporting industries

These include:

1. the presence of internationally competitive supplier

industries that create advantages in downstream industriesthrough efficient, early, or rapid access to cost-effective

inputs

2. internationally competitive related industries that can

coordinate and share activities in the value chain whencompeting or those that involve complementary products.


11/14

Firm strategy, structure, and rivalry

These include:

1. the ways in which firms are managed and choose to

compete;2. the goals that companies seek to attain as well as the

motivations ot their employees and managers;

3. the amount of domestic rivalry and the creation and

persistence of competitive advantage in the respectiveindustry.


12/14

The role of chance

Chance events can nullify the advantages of some

competitors and bring about a shift in overall competitive

position because of developments such as:

1.new inventions;

2.significant shifts in world financial markets or

exchange rates;

3.discontinuities in input costs such as oil shocks


13/14

The role of government

Government can influence all 4 of the major determinants

through actions such as:

1. subsidies;2. education policies;

3. the regulation or deregulation of capital markets;

4. the establishment of local product standards and regulations;

5. the purchase of goods and service;6. tax laws;

7. antitrust regulation.


14/14

Conclusions

Modern models of national competitiveness prefer to

use firms as units of analysis

Factor endowment matters less

Governmental policies should be providing beneficialenvironment rather than spend resources by picking

winners

Theories of national competitiveness do not accountfor power relations between states

National Competitiveness in Global Economy

Documents

Transcript of National Competitiveness in Global Economy