• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

To what extent does Porters model of National Competitive Advantage adequately account for variations in national business systems and comparative economic performance? Are other approaches or ideas required?

Extracts from this document...

Introduction

Page To what extent does Porter?s model of National Competitive Advantage adequately account for variations in national business systems and comparative economic performance? Are other approaches or ideas required? Introduction This essay aims to study Porter?s Diamond Model (DM) of National Competitive Advantage (CA), focusing primarily on the criticisms that lay within the model. Other approaches and models to National CA are looked at and touched upon in this essay. The Diamond Model Porter?s DM for National CA has aided us in our understanding of why some nations are more competitive than others (Davies&Ellis;2000). The core principle the DM communicates is that a nation?s CA is dependent on its ability to create strong innovative industry clusters within national borders (Porter;1990). In addition to this, having a home environment that is the most ?forward-looking, dynamic and challenging? helps the nation in maintain CA (ibid). However, even Porter realises that CA is not an easy concept to define, suggesting that national CA is down to productivity (ibid), which continuously needs to upgrade in order for a nation to sustain its CA. Therefore, in order to understand why a nation is competitive, one must understand how and why its productivity grows. Here lies Porter?s DM (Figure 1), consisting of four attributes of a nation which creates an environment for domestic firms to compete in to sustain CA (Table 1) (Oz;2000). All the six elements interact with each other to create a dynamic environment for firms to compete, with Porter believing that those industries that are advanced in all the determinants are likely to be more competitive than the industries who are only partially advanced in the determinants. The Criticisms Such an influential model is subject to criticisms that make apparent the key problems. The following section breaks down the model and looks at similar issues, illustrating with use of nations, industries and firms as examples. Historical Aspects Although Porter states that if a nation has advantages in each determinant it will perform well economically; what is unclear is how a nation grows to be in that position. ...read more.

Middle

Moreover, Reich (1992) suggests that specialized skills (such as problem-solving and identifying) are being traded between nation?s more than actual finished products (Lazonick;1993) Dunning?s (1992) contribution to globalization views MNCs influential power over Government decision-making. Furthermore, he recognises that CA is now gained via knowledge and technology, which can be transferred between nations quite easily. Gupta & Govindarajan (2000) state the main reason for the existence of MNCs is down to the ability they have in efficiently transferring and exploiting knowledge in a ?intra-corporate context?, however recognise that the ?tacitness? of knowledge acts as a barrier in this transfer and reproduction (ibid). As will be seen below, China?s encouragement of inwards FDI via joint-ventures has aided in its deployment of foreign management skills and technological adaptations, which will in effect increase the competitiveness of the nation. Apple Inc. for example, is recognized globally as a MNC, being one of the leaders in the electronics and computer software industries. Its international success is supported by its established 294 stores worldwide, yet the manufacturing of the majority of its products is outsourced to China, while the majority its design team works within in the US. As can be seen, Apple has taken advantage of resources globally, with superior human resources around the US and UK, and cheap labour within China. As supported by Reich (1992), workers in one nation can work alongside others in another nation by combining skills together to give customers the best value. As can be seen, a strategy to aid CA lies in the exploitation of benefits in other nations? CA. Another criticism of the DM is Porter?s narrow definition and approach to FDI, implying that inward FDI is not as beneficial for a country as outward FDI (Grein&Craif;1996). Additionally, it is argued by Dunning (1993) that there exists a lack of ?globalization of economic activity? within the DM, as FDI?s importance is not covered in the four determinants (Gugler&Brunner;2007). ...read more.

Conclusion

Available at: http://www.sciencedirect.com/science?_ob=MImg&_imagekey=B6V7S-45DB9WK-7-4&_cdi=5850&_user=122871&_pii=S0148296300001673&_orig=search&_coverDate=06%2F30%2F2002&_sk=999449993&view=c&wchp=dGLzVtz-zSkWb&md5=9aad6b643059c0189b716cec16885339&ie=/sdarticle.pdf Porter, M. (1990). The Competitive Advantage of Nations. Harvard Business Review. March-April 1990. Pages 71 ? 91. [Accessed 20 February 2010]. Reich, Robert. (1992). The Work of Nations. Vintage Books. US Ritsch, A., 2004. How and when did Germany catch up to Great Britain and the US? Results from the official stastistics 1901-1960. [Accessed 11 January 2010]. Rugman, A M. (1991) "Diamond in the Rough," Business Quarterly, 55(3), 61-64. [Accessed 3 March 2010]. Available at: http://web.ebscohost.com/ehost/detail?vid=1&hid=108&sid=68162f2b-dd4e-4c8d-ae6f-7a74332c1048%40sessionmgr110&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bth&AN=9608130741 Rugman, A M. D?Cruz, J R. (1993). The ?Double Diamond? Model of International Competitiveness; The Canadian experience. International business: critical perspectives on business and management. Management International Review 33. Special Issue 2. Pages 17-39. [Accessed on 1 March 2010]. Available at: http://books.google.co.uk/books?hl=en&lr=&id=rm4J824ZF4EC&oi=fnd&pg=PA237&dq=porter+%2B+diamond+%2B+criticism&ots=ftwf6NvpSo&sig=hMoCnB7MIUENMrYtJfk9ltMm8Q0#v=onepage&q=porter%20%2B%20diamond%20%2B%20criticism&f=false Rugman, A M. Verbeke A. (1993) "Foreign Subsidiaries and Multinational Strategic Management: An Extension and Correction of Porter's Single Diamond Framework," Management International Review, 33(2), 71-84. [Accessed 12 March 2010]. Van Den Bosch, F. Van Prooijen, A. (1992). The Competitive Advantage of European Nations: The Impact of National Culture ? a Missing Element in Porter?s Analysis. European Management Journal. Vol 10 (2). Page 173. [Accessed on 1 March 2010]. Available at: http://publishing.eur.nl/ir/repub/asset/11091/Competitive_Advantage_of_European_Nations.pdf Waverman, L. (1995) "A Critical Analysis of Porter's Framework on the Competitive Advantage of Nations," in Alan M. Rugman, Julien Van Den Broeck, and Alain Verbeke (Eds.), Research in Global Strategic Management (Volume 5): Beyond the Diamond, Greenwich, CT: JAI Press. [Accessed 11 March 2010]. Webb, S B., 1980. Tariffs, Cartels, Technology, and Growth in the German Steel Indsutry ? 1879 to 1914. The Journal of Economic History. Volume 40 (2) pp 309-330. [Accessed 11 January 2010]. Available at: http://www.jstor.org/stable/2120181 WSA (World Steel Association). (2008). April 2008 Crude Steel Production. [Accessed 11 March 2010]. Available at: http://www.worldsteel.org/pictures/newsfiles/2008_Apr%5B1%5D.pdf WSA (World Steel Association). (2009). April 2008 Crude Steel Production. [Accessed 11 March 2010]. Available at: http://www.worldsteel.org/?action=newsdetail&id=271 Yetto, P. Craig, J. Davis, J. Hilmer, F. (1992) Are Diamonds a Country?s Best Friend? A Critique of Porter?s Theory of National Competition as Applied to Canada, New Zealand and Australia. Australian Journal of Management. Volume 17(1). [Accessed on 3 March 2010]. Available at: http://www.agsm.edu.au/eajm/9206/pdf/yetton.pdf ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our University Degree Political & International Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related University Degree Political & International Economics essays

  1. Since the initiation of the open door and reform policy, China has experienced the ...

    Here, another Chinese economist Liu Changli provided his evaluation about the investment behaviour of Japanese automobile industry in China. In his opinion, during the period, Japan exported large numbers of automobiles per year to China and invested in the foreign countries such as America on a large scale.

  2. Was the Great Depression successfully overcome in Australia by 1930?

    Real wages had slowly increased to close to pre-war levels, migration into urban areas began to increase [both from rural Australia and abroad] and the development of infrastructure such as electricity lead to a general feeling of enthusiasm (Spenceley 1981, pp.

  1. Depreciation - What assumptions are required for the Marshall-Lerner condition to hold?

    Discuss with reference to the UK. (longer answer) To discuss the impact of nominal exchange rate changes it is crucial to discuss two main questions as stated by Dornbusch (1996). First, are trade flows responsive to relative prices, and second, can nominal exchange rate changes change relative prices?

  2. Economic growth in China

    the media control policy of Chinese government, it was extremely difficult for the Japanese companies to get the first-hand or even second-hand information about China and its development. All the information they could reach was from Chinese government or the communication through visiting, therefore, under the situation of lack of

  1. Free essay

    International Business

    The U.S. claims that the EU is giving Airbus illegal subsidies in the form of "launch aid," a term describing a system of low interest loans granted by EU countries to Airbus. In addition to low interest rates, launch aid loans are favorable because they only have to be repaid once the specific aircraft are sold.

  2. Through a detailed review of the relevant literature, examine the arguments supporting the view ...

    An information society in which this potential was realised could, perhaps, be one in which wealth was distributed around the world with greater equity - since such enterprises may tend to buy physical goods and services locally. It would certainly exhibit a great deal of genuine economic competition as numerous such enterprises and networks joined in a vigorous open market.

  1. Unions have played a significant role in workforce history, have they outlived their purpose ...

    But industrial development in the early nineteenth century slowly widened the gap between employers and skilled workers, so the workers began to think of industrial factories as a threat to both their wages and status. They soon formed young craft unions in an attempt to resist sudden wage cuts, longer

  2. How did Japan perform until 1991? How do you explain this performance?

    2. Why has Japan stagnated since 1991? Why does neither fiscal nor monetary policy seem to work? What is the role of the very institutions that seem to have facilitated the miracle? This is because the Yen kept appreciating. The export sector became less competitive and complex regulations did not allow foreign goods to enter into Japan to counter this problem.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work