Applying Porter\'s Model In 1990, Michael Porter of the Harvard Business School

Question

Applying Porter's Model

In 1990, Michael Porter of the Harvard Business School published the results of an intensive research effort that attempted to determine why some nations succeed and others fail in international competition. After he and his team reviewed 100 industries in 10 nations, Porter contended that the degree to which a nation is likely to achieve international success in a certain industry is a function of the combined impact of factor endowments, domestic demand conditions, related and supporting industries, and domestic rivalry. He argued that the presence of all components is usually required for this diamond to boost competitive performance, although chance and government intervention may also play a role.

Porter theorizes that the four attributes in his diamond model may promote or impede the creation of competitive advantage. Factor endowments are a nation's position in factors of production such as skilled labor or infrastructure necessary to compete in a given industry. Demand conditions are nature of home demand for the industry's product or service. Related and supporting industries are the presence or absence of supplier industries and related industries that are internationally competitive. Firm strategy, structure, and rivalry are the conditions governing how companies are created, organized, and managed and the nature of domestic rivalry.

For each example, select the most appropriate attribute of national competitive advantage from Porter's theory.

1. Different management ideologies can help or harm building national competitive advantage; strong associate with persistence of competitive advantage.
(Click to select)  Firm strategy, structure, and rivalry  Demand conditions  Related and supporting industries  Factor endowments

2. Basic ones are natural resources, climate, location, and demographics.
(Click to select)  Firm strategy, structure, and rivalry  Demand conditions  Related and supporting industries  Factor endowments

3. Advanced ones include communication infrastructure, skilled labor force, and research facilities.
(Click to select)  Firm strategy, structure, and rivalry  Demand conditions  Related and supporting industries  Factor endowments

4. The presence of these ancillary companies, often suppliers, can help achieve strong competitive positions through their strengths within the same industry.
(Click to select)  Firm strategy, structure, and rivalry  Demand conditions  Related and supporting industries  Factor endowments

5. These can help companies create a competitive advantage, when knowledgeable domestic buyers pressure firms to innovate and create more advanced products.
(Click to select)  Firm strategy, structure, and rivalry  Demand conditions  Related and supporting industries  Factor endowments

Explanation / Answer

1. Firm strategy :Building national competitive advantage is firm's strategy

2. Factor endowments : Natural resources, climate , location are factor endowments.

3. Factor endowments : Communication infrastructure and skilled labor force are factor endowments

4. Related and supporting industries : Ancillary companies are related and supporting industries.

5.Demand conditions : To innovate and create more advanced products is firm's strategy.

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