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Increasingly, corporate strategies have to be industries within nations are more competitive
seen in a global context. Even if an than others are, in his book The Competitive
organization does not plan to import or to Advantage of Nations. This model of
export directly, management has to look at an determining factors of national advantage has
international business environment, in which become known as Porters Diamond. It
actions of competitors, buyers, sellers, new suggests that the national home base of an
entrants of providers of substitutes may organization plays an important role in shaping
influence the domestic market. Information the extent to which it is likely to achieve
technology is reinforcing this trend. advantage on a global scale. This home base
provides basic factors, which support or hinder
Michael Porter introduced a model that allows organizations from building advantages in
analyzing why some nations are more global competition. Porter distinguishes four
competitive than others are, and why some determinants:
Firm strategy,
structure and
rivalry
Factor Demand
condi tions condi tions
Related and
supporting
industries
This explains the existence of so-called low- One internationally successful industry may
cost-countries (low costs of labor), agricultural lead to advantages in other related or
countries (large countries with fertile soil), or supporting industries. Competitive supplying
the start-up culture in the United States (well industries will reinforce innovation and
developed venture capital market). internationalization in industries at later stages
in the value system. Besides suppliers, related
Porter points out that these factors are not industries are of importance. These are
necessarily nature-made or inherited. They industries that can use and coordinate
may develop and change. Political initiatives, particular activities in the value chain together,
technological progress or socio-cultural or that are concerned with complementary
changes, for instance, may shape national products (e.g. hardware and software).
factor conditions. A good example is the A typical example is the shoe and leather
discussion on the ethics of genetic engineering industry in Italy. Italy is not only successful with
and cloning that will influence knowledge shoes and leather, but with related products
capital in this field in North America and and services such as leather working
Europe. machinery, design, etc.
Literature:
Michael E. Porter. The Competitive Advantage
of Nations.