Question

5.-Competitiveness of the Home Market. A strongly competitive home market can sharpen a firm’s competitive advantage relative to firms located in less competitive markets. Explain what is meant by the “competitive advantage of nations.

Answer 1

A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade. Companies gain advantage against the world’s best competitors because of pressure and challenge.

They benefit from having strong domestic rivals, aggressive home-based suppliers, and demanding local customers.

Differences in national values, culture, economic structures, institutions, and histories all contribute to competitive success.

There are striking differences in the patterns of competitiveness in every country.

No nation can or will be competitive in every or even most industries. Ultimately, nations succeed in particular industries because their home environment is the most forward-looking, dynamic, and challenging.

For reference:

Porter argued that innovation is what drives and sustains competitiveness. A firm must avail itself of all dimensions of competition, which he categorized into four major components of “the diamond of national advantage”

1. Factor conditions:
2. Demand conditions:
3. Related and supporting industries
4. Firm strategy, structure, and rivalry:

*Using this Diamond of factors, Porter argues that the role of the government should be to support national competitiveness by encouraging rivalry and domestic competition and then, also by promoting strict environmental and safety regulations – all of which should create products of extremely high quality which will compete successfully in the global marketplace.

*At the same time, Porter advises companies to never shirk from challenges and innovations but to, instead, seek to upgrade their strategies and products. All of this should combine to boost other economic sectors and create jobs.

*After laying out this framework, Porter takes his readers through ten of the world’s most important nations, chosen specifically to vary in size, government policy, geographical features, and world regions. In each case, using the Diamond, Porter shows the combination of factors that work together to create internationally competitive climates. These chapters tend to be repetitive and more of interest to a specialized reader – so much so that the book’s introduction offers a map for reading the book out of order to avoid the repetition.