Diamond Concept: Measuring Competitive National Advantages Essay

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Diamond Concept as a Tool for Measuring Competitive
Advantage for Nations

Porter’s five forces were formulated by Michael E. Porter as a framework to analyze industry and business strategy. He posits that countries, just like companies, compete in the international markets for their fair share. According to Davis and Ellis (2000), the focus on competition is diversion from traditional economic thinking. Unlike the previous theories that only work on one or two dimensions, Porter’s theory connects firms, industries and nations.
He put forward two propositions after carrying out studies in different nations. The first one is that the competitive advantage of a nation’s industries is determined by the
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Although widely acclaimed, the theory has its own share of numerous conceptual flaws, especially that of elision. Subsequent research on the theory has tended to refute the theory’s major assertions. For example, contrary to what the theory asserts, sustained prosperity may be achieved without a nation becoming innovation driven (Davidson, 1991).
Many of the internationally successful industries do not have a strong diamond base in place. Similarly, inward foreign direct investment does not indicate a lack of competitiveness. The theory also claims integration between international economics and strategic management. This stems from the mistaken attempt to substitute competitive advantage for comparative advantage (Caves, Frankel and Jones, 1993). Policy makers are left with a number of issues with which to base the SWOT-type analysis of their economies’ positions on. This is not in respect to competitiveness but of the different industrial sectors available in their economies. However, they lack reliable guide with respect to the appropriate policies to pursue (Congdon, 1990).
The theory encourages economies, especially the developing ones, to pursue policies that may be harmful. The fundamental objective of Competitive Advantage of Nations (CAN) was to explain why some ‘social groups, economic institutions and nations advance and prosper’ (Porter, 1990). He

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