The Competitive Advantage of Nations

WHAT IS THE DIAMOND posture? DESCRIPTION The adamant Model of Michael doorkeeper for the hawkish advantage of Nations offers a ensample that piece of ass help understand the relative position of a nation in global competition. The model can also be used for study geographic regions. TRADITIONAL COUNTRY ADVANTAGES Traditionally, economic conjecture mentions the following factors for proportional advantage for regions or countries 1. Land 2. Location 3. Natural resources (minerals, energy) 4. Labor, and 5.Local universe size. Because these 5 factors can hardly be square upd, this fits in a sooner passive (inherited) view regarding national economic opportunity. CLUSTERS Porter says that sustain industrial growth has hardly ever been built on above mentioned elementary inherited factors. Abundance of such factors may actually undermine competitive advantage He introduces a concept called clusters or groups of interconnected firms, suppliers, think industries, and instituti ons, that arise in certain locations.These clusters are geographic concentrations of interconnected companies, narrow down suppliers, service providers, and associated institutions in a particular field. They grow on locations where teeming resources and competences amass and reach a critical threshold, giving it a diagnose position in a given economic branch of activity, with a decisive sustainable competitive advantage over others places, or evening a adult male supremacy in that field. Porter says clusters can influence competition in three instructions They can increase the productivity of the companies in the cluster. They can drive innovation in the field. They can own new businesses in the field. Some well-known examples of Clusters are USA/atomic number 14 Valley (computers), Netherlands/Rotterdam (logistics), India/Bangalore (software outsourcing), USA/Hollywood (movies), France/Paris (fashion). According to Porter, as a rule competitive advantage of nations is the outcome of 4 interlinked advanced factors and activities in and between companies in these clusters. These can be influenced in a pro-active way by government. INTERLINKED ADVANCED FACTORS FOR COMPETITIVE ADVANTAGE 1.The Strategy, Structure and Rivalry of Firms. The world is dominated by dynamic conditions. Direct competition impels firms to work for increases in productivity and innovation. 2. Demand Conditions. If the customers in an economy are very demanding, the wedge facing firms to constantly improve their competitiveness via innovative products, through elevated quality, etc, will be greater. 3. Related Supporting Industries. Spatial proximity of upstream or downstream industries facilitates the substitute of information and promotes a continuous exchange of ideas and innovations. 4. Factor Conditions.Contrary to conventional wisdom, Porter argues that the key factors of production (or change factors) are created, not inherited. Specialized factors of production are skil led grasp, corking and infrastructure. Non-key factors or general use factors, such as unskilled labor and raw materials, can be obtained by any company and, hence, do not generate sustained competitive advantage. However, specialized factors involve heavy, sustained investment. They are more difficult to duplicate. This creates a competitive advantage, because if other firms cannot slow duplicate these factors, they are valuable.THE ROLE OF GOVERNMENT IN THE DIAMOND MODEL OF PORTER The role of government in the Diamond Model of Porter is to act as a catalyst and challenger it is to encourage or even push companies to raise their aspirations and move to higher levels of competitive performance. They must(prenominal) encourage companies to raise their performance, to stimulate early demand for advanced products, to commission on specialized factor creation and to stimulate local contestation by limiting direct cooperation and enforcing anti-trust regulations. THE COMPETITIVE ADVANTAGE OF NATIONSPorter introduced this model in his book The Competitive Advantage of Nations, after having done investigate in ten leading trading nations. The book was the first theory of competitiveness based on the causes of the productivity with which companies compete. Instead of traditional comparative advantages such as natural resources and pools of labor. This book should be considered obligatory knowledge for government economic strategists. It is also highly recommended for corporate strategists that are interested in the macro-economic environment of corporations.