Question

Examine the competitiveness of your firm’s home country in a particular sector(eg Oil and Gas, Construction etc) in the light of Porter's Diamond Model. Identify a specific cluster (a city or region) in the home country where chosen industry is competitive and give your recommendation to further improve the competitiveness of that cluster by benchmarking with one of the best clusters (Stuttgart, Germany for Automotive cluster) in the world for same industry

Answer 1

Home country is always special not only from the perspective of economic welfare but also from the perspective of the productivity of a firm. In a home country a firm is able to compete to its fullest, since a home country is well known to the producer or manufacturer and the conditions pertaining to the maximized output generation are familiar. Let us discuss a home country firm that deals in construction business. Let us give the firm a name ‘A’. Firm A doing business in a country is very competitive and well established as a reputed construction firm. In the home country, the firm does not need to worry much about the economic, political, legal or social conditions. The firm can invest in any amount of money in the home country because the potential of growth is open and there are no restrictions on financial investments. Similarly, the society is aware of the motives and character of the firm, and there is hardly any resistance from the society. Likewise, the political establishment is also in favor of the construction firm, as they ideally want their nation to grow industrially and infrastructurally. The legal situations are well managed, and law does not come in the way of any of the ventures of the firm, unless the firm indulges in any illegal activities.

  Now, if we suppose that the country A wishes to go international and do business in a foreign country, then there are a lot of conjugations that the country needs to look after. Here, the firm needs to worry much about each of the economic, political, legal or social conditions. Primarily the firm will need to get access to the Internal agency of the nation in which the firm wishes to expand its business to. After it get the necessary access and permission from the various department, the firm can then speculate of starting the business. Now, firm A will have to individually deal with each of the factors, in which it had all easy accesses and had nothing to worry about in the home country. Here, the firm cannot invest in any amount of money in the foreign country because although the potential of growth is open, there are a lot of restrictions on financial investments by a foreign country. Similarly, the society is not aware of the motives and character of the firm, and there is initially some resistance from the society. Likewise, the political establishment is also usually not in favor of the construction firm, as they ideally want their nation to grow industrially and infrastructurally with their own home countries leading the way. The legal situations are perhaps the most difficult as law always keeps an eye on the international firms. Although it does not come in the way of any of the ventures of the firm, unless the firm indulges in any illegal activities, but there is a very strict vigil on the Outside firms. Therefore, the firm must overcome these restrictions to perform well in the International market too.