Porter's Diamond of National Competitive Advantage

what sort of things does 'the firm strategy, structure and rilvary' involve.

1. how incumbent firms are managed and compete 2. corporate goals 3. level of domestic rilvary.

The country should export products from the industries where ....

all 4 factors are favourable.

according to this theory success of international trade depends on 4 mutually dependent factors, what are they?

1. demand conditions - development 2. factor conditions - development 3. related and supporting industries -development 4. firm strategy, structure and rivalry - sustainability

Analysis of Porter's diamond: the industries on which this theory is premised grew when companies access to to competitive capabilities was MUCH MORE DOMESTICALLY FOCUSED. Now, in this era of globalisation explain why the theory is not so strong. (conditions not static or purely domestic)

All 4 conditions don't need to be favourable all in 1 place. 1. business success stimulated by foreign demand and export led growth - not just domestic 2. FOP's more internationally mobile and less reliant on domestic demand conditions- can import what your lacking 3. companies react to foreign competition too so just because any of the conditions are unfavourable, may not inhibit the company acquiring them later and competing globally.

What happened in Italy in that sustainability phase?

BTE were low and there were hundreds of companies in the tile industry. Rivalry increased, italian consumers demanded increasingly sophisticated product. This forced breakthroughs in product and process technologies so italian producers then had the advantage over foreign firms and allowed Italy to have largest global share of tile exports!

What are favourable demand conditions?

companies have observed demand for the products. e.g in Italy post ww2, demand in the ceramic tiles industry grew as consumers wanted cool floors in the hot climate (there was a housing boom). -future size and growth of D?

What does this theory aim to do?

it aims to explain the source of a nation's success in a particular industry.

How can 'related and supporting industries' be favourable?

presence of internationally competitive supplier industries (help lower costs of production). e.g enamel and glazing industry strong in Italy.

what are favourable factor conditions?

right quantities of labour, raw materials, capital and knowledge etc to produce the g/s at a favourable cost. e.g in Italy, wood was expensive but factor conditions favourable and were available in Italy!

the firms strategy, structure and rilvary is more concerned with what?

sustaining the competitive advantage, once production has been initiated.