SlideShare a Scribd company logo
1 of 14
Theory of National Competitive Advantage
The theory attempts to analyze the reasons for a
nation’s success in a particular industry
Porter studied 100 industries in 10 nations
Postulated determinants of competitive advantage of a
nation were based on four major attributes
 Factor endowments
 Demand conditions
 Related and supporting industries
 Firm strategy, structure and rivalry
Porter’s Diamond
Success occurs where these attributes exist
More/greater the attribute, the higher chance of
success
The diamond is mutually reinforcing
Factor Endowments
Factor endowments: A nation’s position in
factors of production such as skilled labor or
infrastructure necessary to compete in a given
industry
Basic factor endowments
Advanced factor endowments
Basic Factor Endowments
Basic factors: Factors present in a country
Natural resources
Climate
Geographic location
Demographics
While basic factors can provide an initial
advantage they must be supported by advanced
factors to maintain success(Advanced Factors
enable a speedier transformation of Basic
Factors??)
Advanced Factor Endowments
Advanced factors: The result of investment by
people, companies, and government are more
likely to lead to competitive advantage
If a country has no basic factors, it must invest in
advanced factors
Advanced Factor Endowments
Communications
Skilled labor
Research
Technology
Education
Demand Conditions
Demand:
creates capabilities
creates sophisticated and
demanding consumers
Demand impacts quality
and innovation
Related and Supporting Industries
Creates clusters of supporting industries that are
internationally competitive
Must also meet requirements of other parts of
the Diamond
Firm Strategy, Structure
and Rivalry
Long term corporate vision is a determinant of
success
Management ‘ideology’ and structure of the firm
can either help or hurt you
Presence of domestic rivalry improves a
company’s competitiveness
Porter’s Theory-Predictions
Porter’s theory should predict the pattern of
international trade that we observe in the real
world
Countries should be exporting products from
those industries where all four components of the
diamond are favorable, while importing in those
areas where the components are not favorable
Implications for Business
Location implications:
Disperse production activities to countries where they
can be performed most efficiently
First-mover implications:
Invest substantial financial resources in building a first-
mover, or early-mover advantage
Policy implications:
Promoting free trade is in the best interests of the
home country, not always in the best interests of the
firm, even though many firms promote open markets
Implications for Strategy of
Individual Firms ???
Group presentations based on handout!

More Related Content

What's hot

Foreign direct investment
Foreign direct investmentForeign direct investment
Foreign direct investmentSonam Basia
 
International Business Introduction, Nature and Scope
International Business   Introduction, Nature and ScopeInternational Business   Introduction, Nature and Scope
International Business Introduction, Nature and ScopeDheeraj Rajput
 
Foreign Direct Investment (Theories of FDI)
Foreign Direct Investment (Theories of FDI)Foreign Direct Investment (Theories of FDI)
Foreign Direct Investment (Theories of FDI)Mamta Bhola
 
International Business Management full notes
International Business Management full notesInternational Business Management full notes
International Business Management full notesversatileBschool
 
Competitive Advantage of Nations
Competitive Advantage of NationsCompetitive Advantage of Nations
Competitive Advantage of NationsWesley Shu
 
Porter’s theory
Porter’s theoryPorter’s theory
Porter’s theoryMd Saim
 
International Trade Theories
International Trade TheoriesInternational Trade Theories
International Trade Theoriesshanmugapriya
 
Theories of international trade
Theories of international tradeTheories of international trade
Theories of international tradenisaa89
 
Domestic and international business
Domestic and international businessDomestic and international business
Domestic and international businessNishu Jindal
 
Unit 5 conflict management
Unit 5 conflict managementUnit 5 conflict management
Unit 5 conflict managementGanesha Pandian
 
International product life cycle
International product life cycleInternational product life cycle
International product life cycleHarshvardhan Meena
 
Instrument of trade policies
Instrument of trade policiesInstrument of trade policies
Instrument of trade policiesHuê Bùi Thị
 
Country-attractiveness
 Country-attractiveness Country-attractiveness
Country-attractivenessSujen Nisha
 
Chapter 2 theories of international trade and investment
Chapter 2 theories of international trade and investmentChapter 2 theories of international trade and investment
Chapter 2 theories of international trade and investmentTribhuvan University
 
International Business Management unit 1 introduction
International Business Management unit 1 introductionInternational Business Management unit 1 introduction
International Business Management unit 1 introductionGanesha Pandian
 
Concept of international business environment
Concept of international business environmentConcept of international business environment
Concept of international business environmentPinki Verma
 
International trade theories
International trade theoriesInternational trade theories
International trade theoriesvalliappan1991
 
Foreign direct investment
Foreign direct  investmentForeign direct  investment
Foreign direct investmentSumit Behura
 
08 Cross-National Cooperation and Agreements
08 Cross-National Cooperation and Agreements08 Cross-National Cooperation and Agreements
08 Cross-National Cooperation and AgreementsBrent Weeks
 

What's hot (20)

Foreign direct investment
Foreign direct investmentForeign direct investment
Foreign direct investment
 
International Business Introduction, Nature and Scope
International Business   Introduction, Nature and ScopeInternational Business   Introduction, Nature and Scope
International Business Introduction, Nature and Scope
 
Foreign Direct Investment (Theories of FDI)
Foreign Direct Investment (Theories of FDI)Foreign Direct Investment (Theories of FDI)
Foreign Direct Investment (Theories of FDI)
 
International Business Management full notes
International Business Management full notesInternational Business Management full notes
International Business Management full notes
 
Competitive Advantage of Nations
Competitive Advantage of NationsCompetitive Advantage of Nations
Competitive Advantage of Nations
 
Porter’s theory
Porter’s theoryPorter’s theory
Porter’s theory
 
International Trade Theories
International Trade TheoriesInternational Trade Theories
International Trade Theories
 
Ibm unit - i
Ibm   unit - iIbm   unit - i
Ibm unit - i
 
Theories of international trade
Theories of international tradeTheories of international trade
Theories of international trade
 
Domestic and international business
Domestic and international businessDomestic and international business
Domestic and international business
 
Unit 5 conflict management
Unit 5 conflict managementUnit 5 conflict management
Unit 5 conflict management
 
International product life cycle
International product life cycleInternational product life cycle
International product life cycle
 
Instrument of trade policies
Instrument of trade policiesInstrument of trade policies
Instrument of trade policies
 
Country-attractiveness
 Country-attractiveness Country-attractiveness
Country-attractiveness
 
Chapter 2 theories of international trade and investment
Chapter 2 theories of international trade and investmentChapter 2 theories of international trade and investment
Chapter 2 theories of international trade and investment
 
International Business Management unit 1 introduction
International Business Management unit 1 introductionInternational Business Management unit 1 introduction
International Business Management unit 1 introduction
 
Concept of international business environment
Concept of international business environmentConcept of international business environment
Concept of international business environment
 
International trade theories
International trade theoriesInternational trade theories
International trade theories
 
Foreign direct investment
Foreign direct  investmentForeign direct  investment
Foreign direct investment
 
08 Cross-National Cooperation and Agreements
08 Cross-National Cooperation and Agreements08 Cross-National Cooperation and Agreements
08 Cross-National Cooperation and Agreements
 

Viewers also liked

Porters Final Presentation
Porters Final PresentationPorters Final Presentation
Porters Final PresentationCanada
 
Porter’s diamond model
Porter’s diamond modelPorter’s diamond model
Porter’s diamond modelRezwana Newaz
 
Ppt competitive advantage
Ppt competitive advantagePpt competitive advantage
Ppt competitive advantagezhouguoqing
 
Applying Porter Diamond model on Beximco Textile Ltd.
Applying Porter Diamond model on Beximco Textile Ltd.Applying Porter Diamond model on Beximco Textile Ltd.
Applying Porter Diamond model on Beximco Textile Ltd.badhon11-2104
 
Advantages and disadvantages of free trade
Advantages and disadvantages of free tradeAdvantages and disadvantages of free trade
Advantages and disadvantages of free tradeRichard Robalino
 
The Heckscher-Ohlin theory of international trade/ Modern International Trade...
The Heckscher-Ohlin theory of international trade/ Modern International Trade...The Heckscher-Ohlin theory of international trade/ Modern International Trade...
The Heckscher-Ohlin theory of international trade/ Modern International Trade...clincy cleetus
 
International Business (BBA MBA)
International Business (BBA MBA)International Business (BBA MBA)
International Business (BBA MBA)Rahul Boddul
 
The competitive advantage of nations
The competitive advantage of nationsThe competitive advantage of nations
The competitive advantage of nationsUc Daovan
 
Porter's Diamond Analysis
Porter's Diamond AnalysisPorter's Diamond Analysis
Porter's Diamond AnalysisNeelam Asad
 
competitive advantage
competitive advantagecompetitive advantage
competitive advantageSaurabh Verma
 
Tesco operations and supply chain
Tesco operations and supply chainTesco operations and supply chain
Tesco operations and supply chainAamir chouhan
 
Competitive advantage
Competitive advantageCompetitive advantage
Competitive advantageMohit Singla
 
Competitor Analysis
Competitor AnalysisCompetitor Analysis
Competitor AnalysisEyya Ahmed
 
Factor Endowments And Effect On Trade
Factor Endowments And Effect On TradeFactor Endowments And Effect On Trade
Factor Endowments And Effect On TradeRudo Chengeta
 
International Competitive Advantage
International Competitive AdvantageInternational Competitive Advantage
International Competitive AdvantageVarun Jain
 
Discovering your uniqueness by Anand pillai
Discovering your uniqueness by Anand pillaiDiscovering your uniqueness by Anand pillai
Discovering your uniqueness by Anand pillaiSameer Mathur
 
Creating your personal brand by anand pillai a visual summary
Creating your personal brand by anand pillai   a visual summaryCreating your personal brand by anand pillai   a visual summary
Creating your personal brand by anand pillai a visual summarySameer Mathur
 

Viewers also liked (20)

Porters Final Presentation
Porters Final PresentationPorters Final Presentation
Porters Final Presentation
 
Porter’s diamond model
Porter’s diamond modelPorter’s diamond model
Porter’s diamond model
 
Ppt competitive advantage
Ppt competitive advantagePpt competitive advantage
Ppt competitive advantage
 
Applying Porter Diamond model on Beximco Textile Ltd.
Applying Porter Diamond model on Beximco Textile Ltd.Applying Porter Diamond model on Beximco Textile Ltd.
Applying Porter Diamond model on Beximco Textile Ltd.
 
Advantages and disadvantages of free trade
Advantages and disadvantages of free tradeAdvantages and disadvantages of free trade
Advantages and disadvantages of free trade
 
The Heckscher-Ohlin theory of international trade/ Modern International Trade...
The Heckscher-Ohlin theory of international trade/ Modern International Trade...The Heckscher-Ohlin theory of international trade/ Modern International Trade...
The Heckscher-Ohlin theory of international trade/ Modern International Trade...
 
Porter's Diamond theory
Porter's Diamond theoryPorter's Diamond theory
Porter's Diamond theory
 
Competitive advantage
Competitive advantageCompetitive advantage
Competitive advantage
 
International Business (BBA MBA)
International Business (BBA MBA)International Business (BBA MBA)
International Business (BBA MBA)
 
The competitive advantage of nations
The competitive advantage of nationsThe competitive advantage of nations
The competitive advantage of nations
 
Porter's Diamond Analysis
Porter's Diamond AnalysisPorter's Diamond Analysis
Porter's Diamond Analysis
 
competitive advantage
competitive advantagecompetitive advantage
competitive advantage
 
Tesco operations and supply chain
Tesco operations and supply chainTesco operations and supply chain
Tesco operations and supply chain
 
Competitive advantage
Competitive advantageCompetitive advantage
Competitive advantage
 
Competitor Analysis
Competitor AnalysisCompetitor Analysis
Competitor Analysis
 
Factor Endowments And Effect On Trade
Factor Endowments And Effect On TradeFactor Endowments And Effect On Trade
Factor Endowments And Effect On Trade
 
International Competitive Advantage
International Competitive AdvantageInternational Competitive Advantage
International Competitive Advantage
 
Anand Pillai
Anand PillaiAnand Pillai
Anand Pillai
 
Discovering your uniqueness by Anand pillai
Discovering your uniqueness by Anand pillaiDiscovering your uniqueness by Anand pillai
Discovering your uniqueness by Anand pillai
 
Creating your personal brand by anand pillai a visual summary
Creating your personal brand by anand pillai   a visual summaryCreating your personal brand by anand pillai   a visual summary
Creating your personal brand by anand pillai a visual summary
 

Similar to Competitive advantage of nations

Enu international competition 120812
Enu international competition 120812Enu international competition 120812
Enu international competition 120812Stephen Ong
 
Preliminary Business Plan Report Rubrics 1. Completi
 Preliminary Business Plan Report Rubrics  1. Completi Preliminary Business Plan Report Rubrics  1. Completi
Preliminary Business Plan Report Rubrics 1. CompletiTatianaMajor22
 
Porter's national diamond model
Porter's national diamond modelPorter's national diamond model
Porter's national diamond modelAnil Kumar Sharma
 
Chapter 9 hitt pp slides
Chapter 9 hitt pp slidesChapter 9 hitt pp slides
Chapter 9 hitt pp slidesMohit Bansal
 
Competitive Advantage of Nations.pdf
Competitive Advantage of Nations.pdfCompetitive Advantage of Nations.pdf
Competitive Advantage of Nations.pdfAyeshIndikaKarunarat
 
M01eiteman013609100812mbfc01 101228185346-phpapp02
M01eiteman013609100812mbfc01 101228185346-phpapp02M01eiteman013609100812mbfc01 101228185346-phpapp02
M01eiteman013609100812mbfc01 101228185346-phpapp02Hatim100
 
Ch01 Discussion Light
Ch01 Discussion LightCh01 Discussion Light
Ch01 Discussion LightAvinash Kumar
 
Strategic Management Ch09
Strategic Management Ch09Strategic Management Ch09
Strategic Management Ch09Chuong Nguyen
 
Global Strategy, centralization-decentralization debate part ii only[cvg 08]
Global Strategy, centralization-decentralization debate part ii only[cvg 08]Global Strategy, centralization-decentralization debate part ii only[cvg 08]
Global Strategy, centralization-decentralization debate part ii only[cvg 08]Fan DiFu, Ph.D. (Steve)
 
Entrepreneurship in the Industry
Entrepreneurship in the IndustryEntrepreneurship in the Industry
Entrepreneurship in the IndustryHariniJayasundara
 
Ch09 Discussion Light
Ch09 Discussion LightCh09 Discussion Light
Ch09 Discussion LightAvinash Kumar
 
STRATEGIC FIT WITH THE INDUSTRY ENVIRONMENT ASSESSMENT 1STRA.docx
STRATEGIC FIT WITH THE INDUSTRY ENVIRONMENT ASSESSMENT 1STRA.docxSTRATEGIC FIT WITH THE INDUSTRY ENVIRONMENT ASSESSMENT 1STRA.docx
STRATEGIC FIT WITH THE INDUSTRY ENVIRONMENT ASSESSMENT 1STRA.docxflorriezhamphrey3065
 
Standard Grade Business Management - Business Location
Standard Grade Business Management - Business LocationStandard Grade Business Management - Business Location
Standard Grade Business Management - Business LocationMusselburgh Grammar School
 
Strategic Planning For Managers
Strategic Planning For Managers   Strategic Planning For Managers
Strategic Planning For Managers Yodhia Antariksa
 
Expansion Strategy through Internationalization
Expansion Strategy through InternationalizationExpansion Strategy through Internationalization
Expansion Strategy through InternationalizationKashyap Shah
 

Similar to Competitive advantage of nations (20)

Enu international competition 120812
Enu international competition 120812Enu international competition 120812
Enu international competition 120812
 
Chap004
Chap004Chap004
Chap004
 
Preliminary Business Plan Report Rubrics 1. Completi
 Preliminary Business Plan Report Rubrics  1. Completi Preliminary Business Plan Report Rubrics  1. Completi
Preliminary Business Plan Report Rubrics 1. Completi
 
Global Sm
Global SmGlobal Sm
Global Sm
 
Porter's national diamond model
Porter's national diamond modelPorter's national diamond model
Porter's national diamond model
 
Chapter 9 hitt pp slides
Chapter 9 hitt pp slidesChapter 9 hitt pp slides
Chapter 9 hitt pp slides
 
Competitive Advantage of Nations.pdf
Competitive Advantage of Nations.pdfCompetitive Advantage of Nations.pdf
Competitive Advantage of Nations.pdf
 
M01eiteman013609100812mbfc01 101228185346-phpapp02
M01eiteman013609100812mbfc01 101228185346-phpapp02M01eiteman013609100812mbfc01 101228185346-phpapp02
M01eiteman013609100812mbfc01 101228185346-phpapp02
 
Ch01 Discussion Light
Ch01 Discussion LightCh01 Discussion Light
Ch01 Discussion Light
 
Strategic Management Ch09
Strategic Management Ch09Strategic Management Ch09
Strategic Management Ch09
 
Global Strategy, centralization-decentralization debate part ii only[cvg 08]
Global Strategy, centralization-decentralization debate part ii only[cvg 08]Global Strategy, centralization-decentralization debate part ii only[cvg 08]
Global Strategy, centralization-decentralization debate part ii only[cvg 08]
 
Global Entry Strategy
Global Entry StrategyGlobal Entry Strategy
Global Entry Strategy
 
Entrepreneurship in the Industry
Entrepreneurship in the IndustryEntrepreneurship in the Industry
Entrepreneurship in the Industry
 
Ch09 Discussion Light
Ch09 Discussion LightCh09 Discussion Light
Ch09 Discussion Light
 
STRATEGIC FIT WITH THE INDUSTRY ENVIRONMENT ASSESSMENT 1STRA.docx
STRATEGIC FIT WITH THE INDUSTRY ENVIRONMENT ASSESSMENT 1STRA.docxSTRATEGIC FIT WITH THE INDUSTRY ENVIRONMENT ASSESSMENT 1STRA.docx
STRATEGIC FIT WITH THE INDUSTRY ENVIRONMENT ASSESSMENT 1STRA.docx
 
Standard Grade Business Management - Business Location
Standard Grade Business Management - Business LocationStandard Grade Business Management - Business Location
Standard Grade Business Management - Business Location
 
international strategy IBM
international strategy IBMinternational strategy IBM
international strategy IBM
 
Strategic Planning For Managers
Strategic Planning For Managers   Strategic Planning For Managers
Strategic Planning For Managers
 
Expansion Strategy through Internationalization
Expansion Strategy through InternationalizationExpansion Strategy through Internationalization
Expansion Strategy through Internationalization
 
5 Force.ppt
5 Force.ppt5 Force.ppt
5 Force.ppt
 

More from Brahm Sharma

Emerging distribution models
Emerging distribution modelsEmerging distribution models
Emerging distribution modelsBrahm Sharma
 
Rural Product strategy
Rural Product strategyRural Product strategy
Rural Product strategyBrahm Sharma
 
Rural Pricing strategy
Rural Pricing strategyRural Pricing strategy
Rural Pricing strategyBrahm Sharma
 
Rural Marketing revisited
Rural Marketing revisitedRural Marketing revisited
Rural Marketing revisitedBrahm Sharma
 
Environment analysis
Environment analysisEnvironment analysis
Environment analysisBrahm Sharma
 
Emerging distribution models
Emerging distribution modelsEmerging distribution models
Emerging distribution modelsBrahm Sharma
 
Consumer buying behaviour rural
Consumer buying behaviour ruralConsumer buying behaviour rural
Consumer buying behaviour ruralBrahm Sharma
 

More from Brahm Sharma (8)

Emerging distribution models
Emerging distribution modelsEmerging distribution models
Emerging distribution models
 
Rural Product strategy
Rural Product strategyRural Product strategy
Rural Product strategy
 
Rural Pricing strategy
Rural Pricing strategyRural Pricing strategy
Rural Pricing strategy
 
Rural Marketing revisited
Rural Marketing revisitedRural Marketing revisited
Rural Marketing revisited
 
Intro ram2014
Intro ram2014Intro ram2014
Intro ram2014
 
Environment analysis
Environment analysisEnvironment analysis
Environment analysis
 
Emerging distribution models
Emerging distribution modelsEmerging distribution models
Emerging distribution models
 
Consumer buying behaviour rural
Consumer buying behaviour ruralConsumer buying behaviour rural
Consumer buying behaviour rural
 

Competitive advantage of nations

  • 1.
  • 2. Theory of National Competitive Advantage The theory attempts to analyze the reasons for a nation’s success in a particular industry Porter studied 100 industries in 10 nations Postulated determinants of competitive advantage of a nation were based on four major attributes  Factor endowments  Demand conditions  Related and supporting industries  Firm strategy, structure and rivalry
  • 3. Porter’s Diamond Success occurs where these attributes exist More/greater the attribute, the higher chance of success The diamond is mutually reinforcing
  • 4.
  • 5. Factor Endowments Factor endowments: A nation’s position in factors of production such as skilled labor or infrastructure necessary to compete in a given industry Basic factor endowments Advanced factor endowments
  • 6. Basic Factor Endowments Basic factors: Factors present in a country Natural resources Climate Geographic location Demographics While basic factors can provide an initial advantage they must be supported by advanced factors to maintain success(Advanced Factors enable a speedier transformation of Basic Factors??)
  • 7. Advanced Factor Endowments Advanced factors: The result of investment by people, companies, and government are more likely to lead to competitive advantage If a country has no basic factors, it must invest in advanced factors
  • 8. Advanced Factor Endowments Communications Skilled labor Research Technology Education
  • 9. Demand Conditions Demand: creates capabilities creates sophisticated and demanding consumers Demand 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 Long term corporate vision is a determinant of success Management ‘ideology’ and structure of the firm can either help or hurt you Presence of domestic rivalry improves a company’s competitiveness
  • 12. Porter’s Theory-Predictions Porter’s theory should predict the pattern of international trade that we observe in the real world Countries should be exporting products from those industries where all four components of the diamond are favorable, while importing in those areas where the components are not favorable
  • 13. Implications for Business Location implications: Disperse production activities to countries where they can be performed most efficiently First-mover implications: Invest substantial financial resources in building a first- mover, or early-mover advantage Policy implications: Promoting free trade is in the best interests of the home country, not always in the best interests of the firm, even though many firms promote open markets
  • 14. Implications for Strategy of Individual Firms ??? Group presentations based on handout!

Editor's Notes

  1. Figure 5.6, p. 188