StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Classic Comparative Advantage vs. Porter's Competative Advantage - Essay Example

Cite this document
Summary
There are a few theories that try to define this industry competition; amongst which, Porter’s Five Forces Model and Classic Comparative Advantage are noteworthy. Both try to…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER95.6% of users find it useful
Classic Comparative Advantage vs. Porters Competative Advantage
Read Text Preview

Extract of sample "Classic Comparative Advantage vs. Porter's Competative Advantage"

ic Comparative Advantage vs. Porters Competitive Advantage In a particular industry, the firms are always competing with each other in order to sustain and grow. There are a few theories that try to define this industry competition; amongst which, Porter’s Five Forces Model and Classic Comparative Advantage are noteworthy. Both try to explain industry competition in their own ways. The industry structure and the positioning within a particular industry are the basis on which Porter has promoted his theory of competitive advantage.

He states that the bargaining power of buyers and suppliers, and the threats of substitutes and new entrants affect the industry competitors and in turn, the industry competition. These five forces explain the rules of competition in any industry. As per Porter, the ultimate aim of any competitive strategy is to cope and change the rules in the behavior of any firm. (Porter’s 5 Forces and Industry Structure, n.d.)The firms create competitive advantage by discovering better and innovative ways and bring them to the market that act as an innovation.

These innovations shift the competitive advantage when the rivals fail to perceive new ways of competing or are unable to respond. It is quite obvious that there are noticeable advantages for the early movers. The typical causes that shift the competitive advantage are shifting buyer needs, new technologies, changes in government regulations, shifting the availability or input costs, and the emergence of any new industry segment. A particular firm gains the competitive advantage by performing the strategically important activities in a more cheap way than its competitors.

In other words, it is able to deliver similar benefits like its competitors, but at a much lower cost. A firm might also deliver benefits that exceed the benefits of its competitive products. Therefore, competitive advantage enables a firm in order to create greater value for the customers and in turn, higher benefits for itself. Thus, Michael Porter has identified two types of competitive advantages; differentiation advantage and cost advantage. (Competitive Advantage, n.d.)David Ricardo has explained the famous theory of Comparative Advantage in explaining foreign trade.

Explaining with the example of two nations and two commodities, he argued that trade is beneficial even if one country has absolute cost advantage over the other country in both the commodities. Ricardo has argued that there are gains from the trade, even if a particular nation specializes completely in the production of a particular good, which has a comparative cost advantage in the production and then trading with other nations for good. (Ricardo D., n.d.)Thus, it can be concluded that both the theories are stressing on industry competition.

Porter explains industry competition with the help of five forces model and two types of advantages, cost advantage and differentiation advantage. Though Comparative Advantage does not directly explain industry competitiveness but, competitiveness of industries can be judged by applying comparative advantage theory. List of References:Competitive Advantage, (No Date), Strategic Management, QuickMBA, retrieved on March 6, 2009, from Porter’s 5 Forces and Industry Structure, (No Date), EEsandOR483 – Strategy and Marketing Primer, version 3.

0, retrieved on March 6, 2009, from Ricardo D., (No Date), David Ricardo, 1772-1823, retrieved on March 6, 2009, from

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Classic Comparative Advantage vs. Porter's Competative Advantage Essay”, n.d.)
Classic Comparative Advantage vs. Porter's Competative Advantage Essay. Retrieved from https://studentshare.org/miscellaneous/1552526-classic-comparative-advantage-vs-porters-competative-advantage
(Classic Comparative Advantage Vs. Porter'S Competative Advantage Essay)
Classic Comparative Advantage Vs. Porter'S Competative Advantage Essay. https://studentshare.org/miscellaneous/1552526-classic-comparative-advantage-vs-porters-competative-advantage.
“Classic Comparative Advantage Vs. Porter'S Competative Advantage Essay”, n.d. https://studentshare.org/miscellaneous/1552526-classic-comparative-advantage-vs-porters-competative-advantage.
  • Cited: 0 times

CHECK THESE SAMPLES OF Classic Comparative Advantage vs. Porter's Competative Advantage

International Trade: Is the Theory of Comparative Advantage Obsolete

The author of this assignment "International Trade: Is the Theory of comparative advantage Obsolete?... It was the real or perceived advantage that one man or village had over another that formed the basis of trade and exchange.... comments on the issue of international trade....
20 Pages (5000 words) Assignment

Porter's Model of National Competitive Advantage

… A number of classical theories in international trade suggest that the element of comparative advantage dwells in the feature endowments that a nation may be lucky enough to come by.... Unfavorable circumstances such as labor shortages or inadequate raw materials may force organizations to come up with new methods, and this originality often goes ahead to a national comparative advantage.... Porter made use of a diamond shaped illustration to be the basis of his framework to show the determinants of national advantage....
10 Pages (2500 words) Essay

Analysis of Nationwide Competitiveness

National competitiveness and national diamond Conventional theories of international deal propose that comparative advantage lives in the factor endowment with the intention of a country to inherit.... Porter and National Competitive advantage Institution: Name: Course: Level: Date: Introduction Porter's replica of national gain is convincing in comprehending the workings and attainments of key national business schemes.... To better appreciate the actions through which organisations come up with a competitive advantage and creates investors value, it is useful to divide the business into a sequence of value generating performances referred to as the value chain....
7 Pages (1750 words) Essay

Three Ways That Create Value for a Firm

The second contention is on the resource-based theory (RBT) of the firm where rare and valuable resources give it a sustainable competitive advantage (Peteraf & Wernerfelt cited by Bowman & Ambrosini, 2000) while the third approach states that firms should be able to seize opportunities faster than other firms and gain value.... esources can be defined as anything that gives advantage or disadvantage to the firm.... The support theory of Johnson et al (2005) divides the resources as threshold resources and unique resources, where threshold resource satisfies customer's minimum requirements and unique resources contribute to competitive advantage and make it difficult for the competitor to copy the value....
4 Pages (1000 words) Essay

Critiquing Porters Diamond Model

This paper makes a conclusion that the case of national competitive advantage over comparative advantage, an idea created by Porter has both been a source of debate and discussion.... The purpose of this paper is to analyze whether the national competitive advantage developed by Porter is a convincing framework in the contemporary era.... The case of Ireland, India, Singapore, Korea and Saudi Arabia has revealed that Porter's model of national competitive advantage is still relevant to explain competitiveness of these nations....
10 Pages (2500 words) Essay

Modern Business in Comparative Perspective

The model has been described in the book 'The Competitive advantage of Nations'.... Porter's diamond model is a type of economic model, which is established by Michael Porter in the book The Competitive advantage of Nations, where he explains the reason for the competitiveness of particular businesses in specific nations.... The second analysis is the dynamic process through which competitive advantage can be accomplished.... In the home market, the demand condition helps the companies to produce a competitive advantage where the buyers of the sophisticated home market create the pressure for firms to innovate faster and to produce more advanced products than the competitors....
10 Pages (2500 words) Essay

Modern Business in Comparative Perspective

The purpose of the following paper "Modern Business in Comparative Perspective" is to describe how convincing is Porter's model of national competitive advantage in explaining the characteristics and performance of the business systems of major economies.... It is such questions that this essay seeks to address with the major focus on Porter's national competitive advantage theory in explaining the characteristics and performance of the business systems of major economies....
8 Pages (2000 words) Term Paper

Model of National Competitive Advantage of Porter

Porter's work focuses on home economies, leveraging home diamonds to create competitive advantages; he advocates entrepreneurship and innovation as drivers of advantage, rather than inherited endowments such as land, raw materials, and size of the labour pool, the lack of which he believes can be overcome.... hellip; According to the research findings, it can, therefore, be said that porter's Diamond framework is an important tool for gaining a better understanding of national competitiveness in major economies....
8 Pages (2000 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us