Determinants of National Competitive Advantage
- Production factor endowment and creation - Human resources, infrastructure, knowledge resources, physical and capital...
- Domestic demand conditions - Buyer sophistication, anticipatory demand, demand size
- Related and supporting industries - Competitive, compatible domestic suppliers
- Firm strategy, structure, and rivalry
What are the determinants of competitive advantage in economics?
What are the determinants of national competitive advantage? The four points represent four interrelated determinants that Porter theorizes as the deciding factors of national comparative economic advantage. These four factors are firm strategy, structure and rivalry; related supporting industries; demand conditions; and factor conditions.
What are the four determinants of national competitiveness?
These four factors are firm strategy, structure and rivalry; related supporting industries; demand conditions; and factor conditions. Click to see full answer. People also ask, what are the determinants of national competitiveness?
What is a national competitive advantage?
It should also be noted that according to his opinion, the national competitive advantage represents those "decisive characteristics of a country which allow its firms to create and sustain competitive advantages in certain sectors" (Cojanu, 1997:45).
What are the four determinants of national comparative economic advantage?
The four points represent four interrelated determinants that Porter theorizes as the deciding factors of national comparative economic advantage. These four factors are firm strategy, structure and rivalry; related supporting industries; demand conditions; and factor conditions. Click to see full answer.
What are the determinants of competitive advantage?
Competitive advantages are attributed to a variety of factors including cost structure, branding, the quality of product offerings, the distribution network, intellectual property, and customer service.
What are the determinants of national competitiveness?
As a result, six determinants are determined based on the dia- mond model and stages of competitive development. They are: production re- sources, technology development, market conditions, international business and economic activities, company's strategy and structure, and government role.
Is one of the determinants of national competitive advantage?
Main factors which determine a competitive advantage for country are: endowment with factors, characteristics of domestic demand, domestic competitive environment, links between branches.
What is national competitive advantage theory?
Michael Porter's Diamond Model (also known as the Theory of National Competitive Advantage of Industries) is a diamond-shaped framework that focuses on explaining why certain industries within a particular nation are competitive internationally, whereas others might not.
What are the determinants of nation?
First, the determinants of the GDP share of each nation are the variables that represent the share of each nation in the world, such as shares in world population, investment, human capital, exports, R&D investment, and financial capital flows.
What are the 6 factors of competitive advantage?
Michael Porter pinpoints the following 6 competitive forces which govern each industry:the entry of new competitors,the rivalry among the existing competitors,the bargaining power of buyers,the bargaining power of suppliers,the threat of substitutes.
What are the four components of national competitive advantage?
The four points represent four interrelated determinants that Porter theorizes as the deciding factors of national comparative economic advantage. These four factors are firm strategy, structure and rivalry; related supporting industries; demand conditions; and factor conditions.
What are the determinants for competition in context of international business?
Determinants of competitiveness(International) Market Demand FactorsMacroeconomic and Sector PoliciesIncome and Price ElasticitiesExchange Rate PoliciesConsumer TastesTrade and Licensing PoliciesSettlement and WorkPatterns PoliciesTariff/Non-tariff Barriers into Import MarketsLabor Policies10 more rows
What is Porter's diamond of national advantage?
Porter used a diamond shaped diagram as the basis of a framework to illustrate the determinants of national advantage. This diamond represents the national playing field that countries establish for their industries.
Who developed the theory of national competitive advantage?
Michael Porter suggested that the accomplishment of any industry in global trade depends on upgradable and innovational capacities of the business as well as four other factors, which establish how that firm is going to execute in this global level race.
Which of the following factors according to Porter is most likely to give a country competitive advantage over another country?
Which of the following factors, according to Porter's national Diamond, is most likely to give a country competitive advantage over another country? Skilled Labor. Porter argues that a nation's firms gain competitive advantage if _____________________________.
What are the most potent determinants of competitiveness?
According to prevailing thinking, labor costs, interest rates, exchange rates, and economies of scale are the most potent determinants of competitiveness. In companies, the words of the day are merger, alliance, strategic partnerships, collaboration, and supranational globalization.
How do companies achieve competitive advantage?
Companies achieve competitive advantage through acts of innovation. They approach innovation in its broadest sense, including both new technologies and new ways of doing things. They perceive a new basis for competing or find better means for competing in old ways.
What are the four attributes of national advantage?
Each of these four attributes defines a point on the diamond of national advantage; the effect of one point often depends on the state of others . Sophisticated buyers will not translate into advanced products, for example, unless the quality of human resources permits companies to meet buyer needs. Selective disadvantages in factors of production will not motivate innovation unless rivalry is vigorous and company goals support sustained investment. At the broadest level, weaknesses in any one determinant will constrain an industry’s potential for advancement and upgrading.
Why do nations succeed in particular industries?
Ultimately, nations succeed in particular industries because their home environment is the most forward-looking, dynamic, and challenging.
Why do companies gain advantage against the world's best competitors?
Companies gain advantage against the world’s best competitors because of pressure and challenge. They benefit from having strong domestic rivals, aggressive home-based suppliers, and demanding local customers. In a world of increasingly global competition, nations have become more, not less, important.
What are the factors that determine the flow of trade?
Factor Conditions. According to standard economic theory, factors of production—labor, land, natural resources, capital, infrastructure —will determine the flow of trade. A nation will export those goods that make most use of the factors with which it is relatively well endowed.
What are the attributes of a nation?
The answer lies in four broad attributes of a nation, attributes that individually and as a system constitute the diamond of national advantage, the playing field that each nation establishes and operates for its industries. These attributes are. 1. Factor Conditions.
1. Factor Conditions
Factors can be grouped into human resources like -skilled and qualified labor, labor cost, commitment etc., natural resources, knowledge resources, capital resources, and infrastructure. Porter points out that these factors are not necessarily nature-made or inherited. They may develop and change.
2. Related And Supporting Industries
A set of strong related and supporting industries is important to the international competitiveness of firms. This includes supplier and related industries. If local supporting industries are competitive, firms enjoy more effective and innovative inputs.
3. Firm Strategy, Structure, and Rivalry
The context of characteristics of firm strategy, structure and rivalry in different countries also helps explain bases of advantage. The conditions in nation governing how companies are created, organized, and managed, as well as the nature of domestic rivalry.
4. Demand Conditions
The shaping of particular factor conditions is influence by demand condition. Porter state that home demand is determined by three major characteristics-the mix of customer’s needs and wants, their capacity and expansion rate, and the mechanisms that send out domestic preferences to foreign markets.
Why is competitive supplying important?
Competitive supplying industries will reinforce innovation and internationalization in industries at later stages in the value system. Besides suppliers, related industries are of importance.
What are some examples of national factors?
A good example is the discussion on the ethics of genetic engineering and cloning that will influence knowledge capital in this field in North America and Europe.
How can governments foster such advantages?
According to Porter, governments can foster such advantages by ensuring high expectations of product performance, safety or environmental standards, or encouraging vertical co-operation between suppliers and buyers on a domestic level etc. By Dagmar Recklies. ————————-.
What is Porter's argument about family business?
Porter argues that domestic rivalry and the search for competitive advantage within a nation can help provide organizations with bases for achieving such advantage on a more global scale.
What are the conditions in a country that determine how companies are established, are organized and are managed, and that determine
The conditions in a country that determine how companies are established, are organized and are managed, and that determine the characteristics of domestic competition. Here, cultural aspects play an important role. In different nations, factors like management structures, working morale, or interactions between companies are shaped differently.
How is home demand determined?
According to Porter, home demand is determined by three major characteristics: their mixture (the mix of customers’ needs and wants), their scope and growth rate, and the mechanisms that transmit domestic preferences to foreign markets.
Premises
Determinants of National Advantage
- There are four determinants: 1. Factor conditions- (i.e. position in skilled labor) 2. Demand conditions- (home vs foreign) 3. Related and supporting industries- presence/absence of int’l competitive ones 4. Firm Strategy, structure and rivalry-(re: conditions of government and creation, organization, mgmt and nature of domestic rivalry)
Factor Conditions & Demand
- Inputs necessary to compete (labor, land, natural resources, capital, infrastructure). Nations are endowed with different factors, which relate to the competitive advantage role of those firms in the market. Stock of factors is less important that the rate at which these are applied and grown.
Related and Supporting Industries
- The success of an industry directly links the success of its supplier firms, because one needs to other to determine its competitive advantages.
Firm Strategy, Structure, and Rivalry
- Strategy and Structure of Domestic Firms
1. Nations will succeed in industries where management practices and modes of organization favored by the national environment are well suited to the industries’ sources of competitive advantage. (i.e. Italian successful firms are small and focused, in Germany, successful firms ar… - Goals
Nations will succeed in industries where goals and motivations are aligned with the sources of competitive advantage. 1. Company Goals – will depend on: 2. Goals of Individuals – concern the motivation for skill development and expenditure of necessary efforts to create/sustain advanta…
The Role of Chance
- Chance has had a lot to do with success (no control by firms). Chance events are related to acts of pure invention, technological discontinuities, discontinued input costs, shifts in financial mark...
- Chance allows for shifts in competitive positions. Can nullify advantages of previous leaders and open the way for new firms/nations to take a local or global lead.
- Chance has had a lot to do with success (no control by firms). Chance events are related to acts of pure invention, technological discontinuities, discontinued input costs, shifts in financial mark...
- Chance allows for shifts in competitive positions. Can nullify advantages of previous leaders and open the way for new firms/nations to take a local or global lead.
- Chance events have asymmetric impacts on different nations.
The Role of Government
- Government’s real role in national competitive advantage is in influencing the 4 determinants. Its positive or negative influence can have a significant impact in the success of an industry or a firm in the nation. Government policy can be in turn influenced by the 4 determinants.