Instructor Date Porter’s Model of National Competitiveness Countries participate in the global economy, and have to compete in the tough world market place to maintain their living standards. High productivity and product quality are important factors in maintaining a nation’s competitiveness…
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Governments team up with business institutions to device strategies that will guarantee a competitive edge against rivalry countries. Porter’s diamond framework has linked firms, industries, and nations together to explain international competitiveness of countries. However, the model has failed to capture support from the economic school of thought and relies on management theories. This can be explained in terms of international competitiveness at the firm level. Changing patterns of globalization of the world economy, world trade, and dissemination of technology have changed international competitiveness at the firm level. Emphasis on competition among firms in world markets has renewed interest in international competitiveness of countries. This paper focuses on explaining whether or not countries compete internationally as depicted in Porter’s model. This paper explains theories underlying the economic and management schools of thought. The first section gives an overview of trade theory that gives reasons for differences between economists and management specialists on international competitiveness of countries. These theories also provide the basis for Porter’s diamond theory. The second section examines porter’s framework under the context of economic trade theories. Porter utilizes logical reasoning instead of mathematical economic models to describe different trade theories. This makes it possible for policy-makers to understand the Diamond Framework that can be used to enhance international competitiveness of countries. The last section draws generalizations about the validity of the model. Adam Smith’s theory in 1876 of absolute advantage was the first attempt to explain reasons behind free international trade between countries (Smit, 108). According to Smith, a country can enhance its prosperity by specializing in goods and services in which it has absolute cost advantage over other country (Smit, 108). A country can also improve its prosperity by importing goods and services in which it has absolute cost advantage. Smith’s theory explains why countries can increase their welfare through imports and simultaneously selling goods and services in international markets. Adam smith viewed trade as a positive sum game when developing this theory. This theory contradicts the 16th century mercantilists’ viewpoint of trade as a zero sum game where countries have to export
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Herein the competitive position of the business is analyzed based on an analysis of the key stakeholders like consumers, suppliers, and also the competitive entities like existing and emerging competitors and the prevalence of substitute products in the extended market.
The countries he mentioned as the global leaders in competitive advantage have been proven to be leading in exports across the entire global. These are the United States, Japan and Germany. These claims can be greatly supported by international business analysts.
Koen (2005) argues that Porter’s model brought in a generic value chain mould that comprises of a series of activities found to be similar to a wide variety of firms. Porter identified main and support activities. The core value chain activities are inbound movements, sales and marketing and services.
In this paper, we find out that because of its present competitive advantage, of lower production cost, good network infrastructures, a good international port with access to different parts of the world, ample investment, and well thought out operations and information technology have given the country a greater leap forward.
It's feasible to consider the degree of attractiveness here. In fact it's this particular characteristic that determines the level of industry profits. Thus the opposite is true when unattractive industries incur losses as in the case of those industries that constantly develop characteristics of perfect competition.
The conclusion from this study states that Porters’ model of national competitive advantage provides a degree of variation of national business systems and a comparative economic performance across different nations and industries. The model, however, fails to consider the effects of vital variables such as culture and history in the explanation of economic success in a nation.
This research will begin with the discussion of the Porter’s Diamond Model critics and pros, detailing on the authenticity of the study. The paper then uses Porter’s Framework to analyze IT Outsourcing industry in China, USA, UK, Germany, and Japan. Recommendations and outcomes are discussed at the end of the paper.
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