Advantages And Disadvantages Of The Competitive Advantage Of Nations

There exist classical theories of international trade which discuss the reasons why particular industries and particular economies are more competitive than the rest. In his book The Competitive Advantage of Nations, Michael E Porter argued or analyzed the broad factors which determined the competitiveness of certain economies and industries. This model is based on four nation’s specific factors and two external variables. The four cornerstones of the diamond model are the factor conditions, the demand conditions, the related and supporting industries and

1. What is competitive advantage, and how does it relate to a company’s business model?

A firm has a competitive advantage when it implements a strategy competitors are unable to duplicate or find too costly to imitate (Ireland, Hoskisson and Hitt, 2011, p. 4).

This theory was published for the first time in 1985 inside one of the Porter’s greatest work: “Competitive Advantage: Creating and Sustaining Superior Performance.” In fact, the Porter’s Value Chain is a good tool through which evaluate the organization’s ability in achieving the competitive advantage and if achieved, this tool is useful to measure the quantity of this advantage. A business should focus on one of the primary activities in order to create an advantage in that. Moreover, the value chain can be used also to evaluate and determine which strategy is the best for a company to gain the competitive advantage.

In the article “The Competitive Advantage of Nations” Michael Porter describes a diamond shaped relationship of forces that define a country’s potential for being competitive in a specified industry. The four points on the diamond representing the different forces are: factor conditions; demand conditions; firm strategy, structure and rivalry; and related and supporting industries. According to Porter, the four points apply pressure to each other resulting in a national

Competitive advantage is a position of a company in a competitive landscape that allows the company earning return on investments higher than the cost of investments. Competitive advantage should be relevant, unique and sustainable. Therefore sustainable competitive advantage, it’s a long-term competitive advantage that a company own over others in the same sector that is not easily duplicated or surpassable by its competitors (wikipedia, 2009). Competitive advantage can also be seen as a superiority gained by an organization when it can provide the same value as its

Competitive advantage allows a company to grow and sustain its sales but still retain more customers than its rivals. (Perreault/ Cannon/McCarthy, 2009, p48) defines competitive advantage as ‘’ A firm that has a marketing mix that the target market sees as better that a competitors mix’’. A company achieves a completive advantage when it provides buyers with superior value compared to rival seller’s offers the same value at a lower cost to the firm, this is according to (Thompson/Peteraf/Gamble / Strickland, 2014, p 7)

In the current scenario, most of the countries are facing this problem and are trapped in this vicious circle. Due to lack of investments, there are a few industrial setups in the country which in turn results in lack of opportunities for individuals in the society and as a result, skilled labour is forced to move to other economies leading to a massive brain drain which further results in deficiency of skilled labour and, ultimately the competitive edge is lost.

Competitive advantage is really a position that the company makes return upon its investment that is higher than the price of the expense. Competitive advantage ought to be relevant, distinctive, and environmentally friendly. The word competitive advantage may be the ability acquired through characteristics and resources to do at a greater level compared to others within the same business or marketplace. It is essential mostly simply because that aggressive advantage can make sure that a organization earns extra returns for a longer time of period. Almost just about all businesses need to face rigid competition using their business competition in almost any market these days. Having a benefit over them is not enough to ensure the organization

There have been many different reactions towards Porter’s theory on how nations ought to compete. Some responses were validated while others rebutted his theory. Firstly, the positive response will be discussed before focusing on the criticisms of Porter’s theory. Oz (2002) implemented Porter’s Diamond model to analyse the competitive advantage of five Turkish industries and the outcome was favourable and thus validated Porter’s theory. For example, the uncompetitive Turkish automobile industry resulted in uncompetitive companies, while the presence of demanding buyers and hence intense local rivalry in Turkish construction and leather-clothing industries pushed the companies to innovate and become globally competitive. The Turkish findings by Oz thus validated Porter’s theory that indeed, competitive industries of a nation are inclined to cluster together.

One of the greatest artist Pablo Picasso once said, “Action is the foundational key to success”. Well, we all agree with this quote, but there are many variety of factors that also implies in aspect of life. In the field of business, one of the key elements that ultimately controls the destiny of an organization, is their competitive advantage in a particular industry. The competitive advantage is defined as “an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices”("Competitive Advantage | Business."). In order to deeper understand of competitive advantage in a firm, I chose to read the book “Competitive Advantage Creating And Sustaining Superior Performance” by Michael E. Porter. He is an economist, researcher, author and professor at Harvard Business School most of his career. His extensive researches and wrote many books about economic theory as well as strategy concepts that made him widely recognized in economics and field of business.

The following essay is going to attempt to assess the above proposition and try to find if it is possible to add value continually over a period of time. I will first discuss what competitive advantage is and what it means to a firm. Then I will explain the sources of competitive advantage and how the distinctive capabilities of a firm allow it to sustain added value. The discussion is based on a number of viewpoints from different authors who will be clearly indicated and acknowledged. I begin with explaining what competitive advantage is.

Competitive advantage is explained by Mahoney and Pandian (1992) as the function of industry analysis, organizational governance and the firm’s effects in the form of resource advantages and strategies. In order for a firm to be competitive it must adapt to the volatile business environment and through strategic management decisions establish a competitive advantage that will ultimately produce superior performance relative to its competitors (Akimova 2000).

It is only through industrial effort that a firm can attain or maintain its competitive advantage. Correspondingly, a determined business system will focus on competitive advantage fundamentals such as the chief role of creativity and the scope of challenges and pressure. Such detail exposes the management of a business to perceived shortcuts to success, which are actually failures. The implementation of Porter’s Diamond attempts to provide research results with fewer costs and risks as well. Through appropriate leadership techniques suggested in the model, it is evident that the origin of competitive advantage is a firm’s management. Responsibilities involved are creating pressures for

Any country should use porter diamond theory of national advantage. It's designed to help understand the competitive advantage nations. It suggests that the national home base of any organizations are playing a supportive role in shaping the size or scoop to which it is likely to achieve advantage on a global scale. This home base provides basic factors, which support organizations from building advantages in international competition. Porter classifies four determinants: Factor Condition, Diamond Condition, Relatives & supporting and Structure, strategy & Rivalry. Egypt government acts to catalysts to improve Egypt position in a globally competitive economic environment. They found that they can create new factors such as skilled labor and high technology (Porter M., 1990). Porter's diamond model suggests threat there are inherent reasons why some nations are more competitive than others on an international market. Another factor that influence in competitive advantages such as the policies that put by government. One of the most influencer policies is (FDI) Foreign direct investment