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Michael Porters Theory of National Competitive Advantage/Porters Diamond published in 1990 was based on a study of 100 firms in 10 developed nations Porter questions how Switzerland and Japan could become success stories without assumed prerequisits
FACTORS, which MICHAEL PORTER BELIEVED EXTENDED BEYOND NATURAL ENDOWMENT, INCLUDE.
a sizeable demand from sophisticated consumers, an educated and skilled workforce, intense competition in the industry the existence of related and supporting suppliers
Porter also discusses external influences such as government and chance demand conditions: A company facing a more competitive environment will strive to make itself more efficient Factors of production are nothing more than the inputs to compete in any industry, such as Labour, arable land, natural resources, capital, and infrastructure These are clearly important but PORTER now believes they are less vital to success than before.
Factors most important to competitive advantage in most industries, especially in the industries most vital to productivity growth in advanced economies, are not inherited but are created within a nation, through processes that differ widely across nations and among industries
Government
Factor Conditions
Demand Conditions
Chance
Factor conditions
These include: 1. the quantity, skills, and cost of the personnel; 2. the abundance, quality, accessibility, and cost of the nations physical resources such as land water, mineral deposit, timber, hydroelectric power and fishing grounds; 3. the nations stock of knowledge resources, including scientific, technical, and market knowledge that affect the quantity and quality of goods and services; 4. the amount and cost of capital resources that are available to finance industry; 5. the type, quality, and user cost of the infrastructure, including the nations transportation system, communications system, healt-care system, and other factors that directly affect the quality of life in the country.
Demand conditions
These include:
1. the composition in the home markets as reflected by the various market niches that exists and buyer sophistications 2. the size and growth rate of the home demand; 3. the ways through which domestic demand is internationalized and pulls a nations products and services abroad
Conclusions
Modern models of national competitiveness prefer to use firms as units of analysis Factor endowment matters less Governmental policies should be providing beneficial environment rather than spend resources by picking winners Theories of national competitiveness do not account for power relations between states