Amity Business School

Michael Porter’s theory of

Competitive Advantage

“diamond of national
competitiveness”. 
 Amity Business School

EXPORT PAYMENT
• LETTER OF CREDIT
• REFERS TO A WRITTEN UNDERTAKING BY THE
IMPORTER’S BANK TO THE EXPORTER THAT THE
PAYMENT SHALL BE MADE TO HIM PROVIDED THE
SHIPMENT IS SENT BY HIN IN STRIC COMPLIANCE
OF THE EXPORT CONTRACT.
• Defined as a bank [ the issuing bank ] acting at the
request of and instruction of the customer [ the applicant]
or on its own is to
• Make a payment to the beneficiary or to the third party or
• Accept and paybills of exchange [ drafts drawn by the
beneficiary or
 Amity Business School

• DOCUMENTARY CREDIT
• Authorises another bank to effect such
payment or to accept and pay such bills of
exchange or
• Authorises another bank to negotiate.
• Against stipulated documents provided the
terms and conditions of the credit are
complied with.
 Amity Business School

RED CLAUSE / GREEN CLAUSE

• L/C which allows for advances to be made
CREDIT
to the beneficiary against their statement
that goods will be shipped within the expiry
of the credit or the funds will be repaid.
• The applicant takes a risk as the
commitment to pay is from the beneficiary
without any undertaking of a bank or
guarantee to refund in the event of default
by the beneficiary.
 Amity Business School

STAND BY CREDIT
• THE branch of a bank in another country
is considered another bank for purposes of
documentary credit operations. It can
therefore issue stand by L/C.
• The issuing bank can request one of its
branches to add its confirmation to a credit
which is similar to a stand by credit.
• Beneficiary has to decide whether risk is
adequately covered.
 Amity Business School

D/A --- D/P

• D/A – Documents against acceptance. Also known as
time draft / time bill. On presentation of required
documents the exporter is handed a draft drawn on a
future date – 90 days, 180 days after shipment date i.e
after sight. The L/C is sent to the exporter who is reqd to
produce the draft at the set time and the importer will
esecute the payment. All interest charges borne by the
exporter.
• D/P – Documents against payment. Also known as Sight
credit / sight bill. Payment is executed on presentation of
the documents as soon as shipment is effected.
 Amity Business School

NEGOTIATING BANK
• L/C is negotiable if the issuing bank
authorises the negotiating bank to honour
the draft drawn under the terms of the
credit. .
• The exporter gets the payment before the
documents are scrutinised by the issuing
bank.
 Amity Business School

REVOLVING CREDIT.
• IT provides for the renewal of the amount
of the credit without any amendments to
the original L/C for a given time period for
a given amount.

• Maybe cumulative or non cumulative in

nature i.e facility provided for carry forward
balance of utilisation.
 Amity Business School

BILL OF EXCHANGE
• IT IS AN UNCONDITIONAL WRITTEN
ORDER PREPARED BY AN EXPORTER
ASKING THE IMPORTER TO PAY A
SPECIFIED SUM OF MONEY TO A
SPECIFIED PERSON AT A SPECIFIED
TIME.
 Amity Business School

The four facets of the diamond

are:
• Resources – the existence of resources,
human resources, research and
information infrastructures.
• A business environment that invests in
innovation
• A local market that is demanding
• The presence of supporting industries
 Amity Business School

Economic development has three

broad
• The Resource-driven stages
stage is at the most basic level of
economic development where competitive advantage is
determined by resources such as low cost labor and
access to natural resources. 
• The Investment-driven stage is one level up.  That is
where countries begin to develop competitive advantage
by developing more sophisticated products and improve
their efficiencies. 
• The final stage is the Innovation-driven stage.  That is
when the country’s competitive advantage lies in its
ability to innovate and produce products and services at
the frontier of global technology. 
 Amity Business School

PRODUCT
• What is my export product portfolio?
• What adaptations are to be made to the
exportables?
• What type of packaging is required?
 MAKING A CHOICE Amity Business School

• External demand conditions –

existing levels of demand
internal supply capacity
complexity of marketing tasks
amount of investment required for market entry
• Internal supply capacity
domestic supply base and sustainable export surpluses.
ability to adapt to divergent International standards
input supply position
Govt policy regarding the product.
APPRAISAL of price competitveness
 MAKING A CHOICE Amity Business School

• Complexity of marketing tasks

technicality of the product
• Investment for market entry
warehousing costs
after sales back-up
distributor commission.
 Amity Business School

FACTORS DEMANDING PRODUCT

• Labour costs
DESIGN
• Level of technical skills
CHANGES
• Product simplification
• Automation or manualization
• Literacy • Simplification or remake
• Level of income • Quality and price changes
• Interest rates • Quality and price change
• Level of maintenance • Change in tolerances
• Climatic differences • Product adaption
• Isolation –heavy repair , difficult • Simplification and improvement in
and expensive relaiability
• Difference in standards • Recalibration and resizing
• Availability of other products • Greater or lesser product
• Availability of materials integration
• Power availability • Product structure
• Special conditions • Resizing of product
• Product redesign or invention