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Porter s Diamond Harvard Business School, 1990

Determinants of National Competitive Advantage. Factor endowments:nation's position in factors of production such as skilled labor or infrastructure necessary to compete in a given industry.Demand conditions:the nature of home demand for the industry's product or service.Related and supporting industries:the presence or absence in a nation of supplier industries or related industries that are nationally competitive.Firm strategy, structure and rivalry:the conditions in the nation governing ho33246

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Porter s Diamond Harvard Business School, 1990

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    1. Porter’s Diamond (Harvard Business School, 1990) The Competitive Advantage of Nations. Looked at 100 industries in 10 nations. Thought existing theories didn’t go far enough. Question: “Why does a nation achieve international success in a particular industry?”

    2. Determinants of National Competitive Advantage Factor endowments:nation’s position in factors of production such as skilled labor or infrastructure necessary to compete in a given industry. Demand conditions:the nature of home demand for the industry’s product or service. Related and supporting industries:the presence or absence in a nation of supplier industries or related industries that are nationally competitive. Firm strategy, structure and rivalry:the conditions in the nation governing how companies are created, organized, and managed and the nature of domestic rivalry.

    3. Porter’s Diamond Determinants of National Competitive Advantage

    4. The Diamond Success occurs where these attributes exist. More/greater the attribute, the higher chance of success. The diamond is mutually reinforcing.

    5. Determinants of National Competitive Advantage

    6. Factor Endowments Taken from Heckscher-Olin Basic factors: natural resources climate location demographics Advanced factors: communications skilled labor research technology

    7. Advanced Factor Endowments More likely to lead to competitive advantage. Are the result of investment by people, companies, government.

    8. Relationship of Basic to Advanced Factors Basic can provide an initial advantage. Must be supported by advanced factors to maintain success. No basics, then must invest in advanced factors.

    9. Demand Conditions Demand creates the capabilities. Look for sophisticated and demanding consumers. impacts quality and innovation.

    10. Related and Supporting Industries Creates clusters of supporting industries that are internationally competitive. Must also meet requirements of other parts of the Diamond.

    11. Firm Strategy, Structure and Rivalry Management ‘ideology’ can either help or hurt you. Presence of domestic rivalry improves a company’s competitiveness.

    12. Hofstede Study (IBM) is a general way to look at differences between cultures. 4 dimensions: Power distance. Individualism versus collectivism. Uncertainty avoidance. Masculinity versus femininity. But: Assumption of one-to-one relationship between culture and nation-state. Research may be culturally bound. Respondents worked within a single company. Work is beginning to look dated (1967-1973).

    13. Work Related Values for Selected Countries

    14. Leveraging Subsidiary Skills

    15. Pressures for Cost Reduction and Local Responsiveness

    16. Cost Reduction Mass producing a standardized product at an optimal location. Intense: in commodity industries. Where competitors are in low cost locations. Where there is persistent excess capacity. Where there are low switching costs. Because of greater international competition. Local responsiveness Arise from: Differences in consumer taste and preferences. Differences in infrastructure and traditional practices. Differences in distribution channels. Host government demands.

    18. Four Basic Strategies

    20. Cost Pressures and Pressures for Local Responsiveness Facing Caterpillar

    21. The Advantages and Disadvantages of the Four Strategies

    22. The Advantages and Disadvantages of the Four Strategies

    23. Industry Globalization Drivers-Detailed

    24. Dunning’s Eclectic Paradigm: The OLI Paradigm ownership (O) advantage: MNEs’ capacity to engage competitively in the foreign value-added activities vis-à-vis competitors. locational (L) advantage: MNEs’ wish to locate those foreign value-added activities and/or those relating to the creation of ownership advantage in a host country. internalisation (I) advantage: MNEs’ desire and opportunity to internalise the market for the ownership advantage.

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