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This article review is done for the course of Trends in Global Marketing Strategies. The purpose of this work is to analyse Michael Porter' s model of national diamond and study the determinants affecting the competitive advantage of nations.

Extracts from this document...

Introduction

Article Review Michael Porter: Competitive Advantage of Nations Table of Contents 1 Introduction 1 2 Reviews of the Articles 1 2.1 Competitive Advantage of Nations by Michael Porter 1 2.2 Porter's Competitive Advantage of Nations: an assessment of Robert Grant 5 2.3 Internationalising Porter's Diamond by John Dunning 6 2.4 The Double Diamond Model of International Competitiveness: The Canadian Experience by Alan Rugman and Joseph D'Cruz 7 2.5 Porter's Competitive Advantage revisited by Nicholas J. O�Shaughnessy 8 2.6 Assessing Porter's Framework for National Advantage: the Case of Turkey by �zlem �z 9 3 Synthesis 10 3.1 Overview 10 3.2 Diamond of National Advantage 11 3.3 Model Modifications 12 3.4 Conclusion 13 References 1 Introduction This article review is done for the course of Trends in Global Marketing Strategies. The purpose of this work is to analyse Michael Porter' s model of national diamond and study the determinants affecting the competitive advantage of nations. First we summarise Porter's article and after that five other articles closely related to the model. In this work we focus on the development of the model from the early 90' s. 2 Reviews of the Articles 2.1 Competitive Advantage of Nations by Michael Porter In the article "Competitive Advantage of Nations" Michael Porter represents his model, which goal is to clarify the determinants of national competitive advantage. The writer refers to the model as the national diamond. The model is based on four country-specific determinants and two external variables. This framework was developed through studying competitive performance among 10 countries each evolving several industrial cases. The first of the country specific determinants is factor conditions, which mean the nation's factors of production, such as skilled labour or infrastructure. According to the author the most important factors of production are those that involve sustained and heavy investment and are specialized. He also says that nations can succeed in industries where they are particularly good at factor creation. ...read more.

Middle

Dunning suggests that the national diamond should be replaced with supernational diamond because of the increasing integration between countries. In this case, national political borders become meaningless and the competitive advantage of a country can be influenced by factors outside a country's home diamond. The principle is the same, but the geographical constituency has to be established on different criteria when taking about the supernational diamond. 2.4 The Double Diamond Model of International Competitiveness: The Canadian Experience by Alan Rugman and Joseph D'Cruz The point of view in this article is that Porter's diamond framework explains the success of US, Japanese, and EC-based multinational corporations, but it is not applicable to small, open, trading economies. Rugman and D'Cruz show that Porter's home country diamond does not explain Canada's international competitiveness. Also some other researchers have noticed this problem when trying to apply Porter's model to e.g. New Zealand, and Korea. Rugman and D'Cruz argue that the over 90 % of the world's nations potentially cannot be modelled by the Porter diamond. The authors suggest that substantial modifications of the Porter framework are required to analyze the nature of Canada's successful resource-based multinationals, foreign subsidiaries and institutional arrangements, such as the Canada-US Free Trade Agreement. In order to do this Rugman and D'Cruz present a new "double diamond" framework. In this model Rugman and D'Cruz propose that since Canada in already economically highly integrated with U.S., it should use "The North American" diamond when trying to determine or improve Canada's international competitiveness. This means that Canadians should view the U.S. market as a home market, not just an export market. Canadian owned multinationals have competitive advantages derived from attributes of the U.S. or other foreign diamonds, rather than the Canadian diamond alone. It is also said in the article that each country needs to set its own home-country diamond against the relevant triad diamond. In general, most Asia-Pacific nations will set theirs against Japan. ...read more.

Conclusion

Cultures cannot be ranked and they cannot be valued only on the basis of economical standards. The values of human beings come from the cultural background and history of the country. These aspects determine which issues in a country are being emphasized and admired. For instance, Germans and Japans have faced militarism in the past. That may have created discipline labour force and highly technical demands industries. These aspects can be seen as competitive advantage of these nations. 3.4 Conclusion When we think about the factors that affect competitive advantage of nation, inevitable conclusion is that the model becomes wide and complex. After Porter has published his work of "National Diamond", several authors have proposed that new determinants should be added to the model. The reason for that is that the effects of the determinants in Porter' s model and the relationships between them are not black-and-white. Some of the effects are self-explanatory and there are several exceptions in many cases. This arises the question how well Porter's model or any other model altogether can be applied to all situations. There have been attempts to apply the model in the practise in several countries. In some cases the model works and gives good framework when trying to determinate competitive advantage of some nations, but in some other cases it seems to fail in this attempt. For instance, developing countries are not taken into account in Porter' s research. O'Shaughnessy (1996) argues in his article that Porter' s model is specific to the West. On the other hand, there is a recent study where Porter's model has been quite successfully adapted to explain competitive advantage of developing country (Turkey). The study shows that Porter' s model can be applied to analyse the sources of advantages or disadvantages in an uncompetitive industry. As a conclusion, we can say that the model' s ability to analyse competitive advantage of nation is case-specific. There is indeed a need for wider empirical research, before we can be sure that using this kind of model can assure competitive advantage for nations. ...read more.

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