Question

1. To critically analyze and discuss FOUR different policies with each of the four determinants of national competitive advantage that will attract Multinational Corporations (MNCs) and protect domestic firms in your country. (1000 words)

Answer 1

The four determinants of national competitive advantage according to Porter are factor conditions, demand conditions, related and supporting conditions and organization's strategy, structure, and competitor conditions. In this increasingly demanding business environment, the companies have to look for all the opportunities and actions taken by Government, buyers, sellers, customers, suppliers, new entrants, existing competitors, etc. Michael Porter's concept of factors determining competitive advantage for any nation has practical implications. The four factors are explained below:

1.     Organizations' Strategy, Structure, and Competitors: In India, the favorableness of companies, permission for new entrants, foreign direct investments, competition, entry, and exit of players is very easy. Culture plays a vital role in shaping a company. The commitment level of employees is very high as people are emotionally bonded with the company. Both family run business, as well as private and public industries, are influenced by the owners' principles. India being a high-power distance country, the founders have a high influence on the employees. In India, the competition is fair among the competitors, being a democratic country people have the right to choose their own products and services as per their requirement. It is a case of perfect competition.

1. Factor Conditions: In India, the factor conditions are factors related to production, skills, knowledge, qualification, commitment, market regulation and deregulation policies, stock markets etc. India is optimally known for the low cost of labor, quality resources, labor availability, skilled and knowledgeable workers. The technological and political changes also support companies. MNCs get the required number of skilled resources at a very cheaper rate. Even, countries outside of India migrate knowledgeable people either as expatriates or migrants.
2. Demand Conditions: It is determined by the customer demands, domestic preferences, scope of MNCs and their growth determinants. In most of the MNCs, even if the demand was not there, it was created. Ex- McDonald and KFC when came to India were not readily accepted but later customizing to customers’ demand like having aloo Tikki instead beef Tikki, chicken with spices etc.
3. Related and Supporting Conditions: Competitors and other supporting industries emphasize on creativity and innovation which drives MNCs to be competitive. The accessories or supporting industries provide a strong foundation for any industry.

Four different policies which support the Porter National Competitive advantage is Strategic FDI, shared risks of countries, strategic alliances like joint ventures, mergers, Industrial policy 1991, amendment of FERA, 1993.