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Porters Diamond
(Harvard Business School, 1990)
The Competitive Advantage of Nations. Looked at 100 industries in 10 nations. Thought existing theories didnt go far enough. Question: Why does a nation achieve international success in a particular industry?
McGraw-Hill/Irwin
4-30
Porters Diamond
Determinants of National Competitive Advantage
Firm Strategy, Structure and Rivalry
Factor Endowments Demand Conditions
Figure 4.6
McGraw-Hill/Irwin
4-31
The Diamond
Success occurs where these attributes exist.
More/greater the attribute, the higher chance of success.
McGraw-Hill/Irwin
4-32
Demand Conditions
Government
McGraw-Hill/Irwin
4-33
Factor Endowments
Taken from Heckscher-Olin Basic factors: natural resources climate location demographics Advanced factors: communications skilled labor research technology
McGraw-Hill/Irwin
4-34
McGraw-Hill/Irwin
4-35
McGraw-Hill/Irwin
4-36
Demand Conditions
Demand creates the capabilities. Look for sophisticated and demanding consumers.
impacts quality and innovation.
McGraw-Hill/Irwin
4-37
McGraw-Hill/Irwin
4-38
McGraw-Hill/Irwin
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).
Table 3.1
Low
Figure 12.4
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.
Local Responsiveness
Taste and preference Infrastructure And Delegate production practice and marketing to
national subsidiaries
Distribution channels
Delegate marketing to national subsidiaries.
Host government
Manufacture locally.
Low
Strategic Choices
Global Increase profitability through cost reductions from experience curve effects and location economies. Transnational Exploit experienced based cost and location economies, transfer core competencies within the firm, and pay attention to local responsiveness needs.
International Create value by transferring skills to local markets where skills are not present.
Low
Advantages Exploit experience curve effects Exploit location economies Transfer distinctive competencies to Foreign Markets
Disadvantages Lack of local responsiveness Lack of local responsiveness Inability to realize location economies Failure to exploit experience curve effects
Table 12.1a
Multi-domestic Customize product offerings and marketing in accordance with local responsiveness
Transnational
Exploit experience curve effects Exploit location economies Customize product offerings and marketing in accordance with local responsiveness Reap benefits of global learning
Global scale economies Steep experience curve Favorable transportation costs Differences in country costs (incl. Fx) High product development costs Fast-changing technology
COST DRIVERS
Favorable trade policies Compatible technical standards Common marketing regulations GOVERNMENT Government owned DRIVERS competitors Government owned customers Host government Concerns High exports and imports Interdependence of countries Competitors from different countries Globalized competitors Transferable Competitive Advantage Apply equally in service businesses
COMPETITIVE DRIVERS