Clusters and Competitive Advantage by Porter - Term Paper Example

INTRODUCTION Porter tries explaining how the factor and demand conditions that mould a nation's corporate strategies for instance are established. This is because porter attempts to explain the comparative success of whole economies and the concomitant rise of globally competitive industries in particular countries, within the demand; companies and industrial clusters. (M.E. Porter 1998) But porter is better at researching on origins of company's based capabilities than the roots of factor and demand conditions. This is because upcoming countries have proved unable to achieve widespread and industrial transformation by themselves. They have been left with options of relying on developed economies. This is evident through the fact that oversees organizations prevent the expansion of other companies in developing countries by the more fact that they have excellent skills, and finances. Kuznets states that perfect strategies are brought about by many factors with labor as a major factor. (Kuznets 1998) To come up with a detailed informative report of relations economic progress is required something porter admits that his books lack a historic background of economic progress which is required. Cooperative strategies also require the laws of that specific country to be applied. Porter himself could not manipulate how things are run in a country. In order to try realizing change in the way things are run, one will need to be influential to the government. In Japan for instance, tradition, economic status and other minor characteristics influence how the nation runs its business. Hence an outsider would advice wrongly or not be at a position to get information on how the economy can establish itself. No wonder porter states that it's hard to get such information without historical information. (Kuznets 2000) A nation's corporate strategies can also be improved through globalization of production through multinational corporations and International operations, instead of locally integrated industrial structures. This involves cooperate functions such procurement, management and design. This is eliminating local competition and increasing the rate of earnings. An example is Japan and South Korea who majored their industry to international investments. This is widening the nation's base. (Mardon 1990). In case of South Asia, efforts to promote indigenous industrialization have been curtailed though Thailand fostered an industrial class that is internationally competitive. A nation's cooperate strategy is being impound through evaluating investment performance. This is through capital formation, foreign exchange earnings and employment generation. These aspects of investment diversify the nation's ability to widen its premium base and to perfectly fit the global market. (Michael J. 1999) Technological changes and hospitality from the human resource departments. This is due to the high cost from labor prices. For instance in India, the nations cooperate strategy is improved at a faster rate than rest of developing countries. This is greatly affected by the availability of cheap labor. Singaporean state has also actively shaped the investment strategy to a bigger mark through providing an array of subsidies, infrastructure, and complementary public investments. (Michael J. Enright 1999) Tax holidays; have also become increasingly high in many nations too. This in return is become a way of encouraging a range of services designed to enhance the local investment environment. Some of Asian governments have begun offering a range of services like facilitating administrative approvals, provision of specialized physical, customers related, technical infrastructure supporting procurement of labors and skills development, matching investors and local suppliers. Industrial cluster Japan has a motive of having businesses and universities form a broad network all over Japan. The parties involved will include businesses, universities and government agencies, between businesses, between different industries and having a network that allows members to share their different resources. This develops businesses environment to promote innovation. As a result the global market is faced by a competition problem, as Japan can produce high quality products at a very low cost. Industrial clusters are also formed through development of a business environment to promote innovation. This is practical through encouraging formation of a human resource developer for example fostering experts on manufacturing, producing, medicine and information technology, practical education in high schools and professional graduate schools, encouraging professionals like engineers to schools to enhance their knowledge. Other sectors that industrial cluster is shaped unto, is the production, money and finance, skill and technology, wisdom management ability. Creating new businesses in national strategies. This is income formation of a new economic growth strategy. New strategies involve implementation of fiscal or monetary policies, changing the tax rates or encouraging foreign investments. In the USA for instance it concentrated in investing in other countries through oil, technology and provision of professional skills like construction, exchange of products. Promotion of local industry. This actually once happened in China where everybody with a new idea was encouraged through incentives by government. Setting of new goals. Such as sales, number of new companies, and the countries GDP. Establishment of these variables begins by supporting project promotion and base organizations for their programs. This is where private institutions that serve as centers for implementing each project as they are provided with all the necessary equipments. This are considered as holding workshops. In cases of higher learning institutions and government agencies, they are placed under "base organizations." (Bridget M. Hutter 1999) Developing a national organization for forming clusters. This is where different level managers are appointed to act as operations managers. After observing how these people work a conference can be formed to develop a national organization for cluster development. Promotion of cluster coverage is important for supplementing information, technologies, human resource and others. This allows all regions for example in Japan support is provided so as each region benefits from the project in all of Japan. (Hambic and Schecter 1983) The formation of network is of great value since when entrepreneurs and member companies form one network. They tend to introduce monopoly as a result; the new members willing to form new businesses are advantaged. This is because the network brings a positive reaction. Local governments willing to form industrial clusters within the region, are supported by the government but encouraged to connect with other companies overseas. This not only helps clustering to grow globally but also to welcome foreign ideas into the economy. (M.E Porter 2000) Cooperation with knowledge cluster initiative. This is done by different ministries in the government, culture, sports, science and technology and others. This is further broken to expanding to regions and eventually corporations with financial services agency join like they did in Tokyo. This enhances banking functions. This facilitates quick transactions and a broad field of ideals because the banking sector has professional financial advices too. (SM Schecter 1983) It's truly that porter would not have given details on clusters since the Japanese are more advanced and industrial cluster is not an academic way of thinking but rather a practical way judged not by books but a combination of books and general knowledge and experience. Business Structure The types of business structures to be established in a particular country will depend with several factors for instance, legal considerations. Different nations will have different laws on investment policy. Hence, porter can not just generalize on a particular design of a business structure for an country's for instance Muslim country's will have a different investment policy from Christian country's. Location is another factor to put into consideration. Geography of the business structures for instance, a nation located in a cold place will dictate specific structures to be put in place and some specific types of businesses could almost be impossible. Taxation is another factor to consider before thinking of a specific structure. This is because projected sales and profits can be seen. Porter did not put into consideration the different available business structures. For example a company looking to establish itself in Canada has several different business structures. There are specific factors that however, one should put into consideration. Liability and general issues of exposure for instance is one of the considerations to put into consideration in Canada. The government of Canada tries to impose an aspect of liability because structural composition of business in the short run tends to dictate how the firm will relate and fare on that specific country. (Entrepreneurship2007) Financial requirements: This is in all nations, before starting up any business as either an individual or a nation. As a nation, it becomes easy to calculate the magnitude of expected change on the gross domestic product. Nations for instance, will have to legally form a committee that regulates registrations of business structures in a [particular country in order to manage domestic and foreign investors. In Canada for example, co-operations register with the provincial registrars. This is similar to the U.S. ( Teece and Pisano1999) Conclusion "I support the motion that porter fails to explain how the factor demand conditions that mould a nations corporate strategies, business structures and industrial clusters" are established. This is variables far beyond academic research since they depend wholly in government policy. However I cannot fail to acknowledge his efforts in trying to define various concepts and theories that are related to this field. for instance he keeps his opinions open to any critics by declaring in his book "clusters and competitive advantage" that determining such factors would be difficult without a detailed historical follow up of that particular economy. Bibliography Dj Teece, G Pisano (1999) Dynamic Capabilities and strategic management Google .com Dc, Hambic, SM Schecter (1983) Turnaround strategies for mature industrial product business units. Juster publications. Nicolai J. Fopss, Knudsen M. Christian Knudsen. (1990) towards a competence theory of the firm. Oxford publication. Entrepreneurship (2007) strategic entrepreneurship journal. Michael J. (1999 regional clusters and firm strategy. Oxford university press. Bridget M. Hutter (1999) the reader in environment law. M.E Porter (2000) can Japan Compete ISBN 0465059899 M.E . Porter (1998) clusters and competitive advantage Michael J. Enright (1999) Regional clusters and firm strategy. www.porterbooks.com Read More