What Are The Four Factors That Influence Competitive Advantage?

1340 WordsMay 5, 20166 Pages
As the market continues to globalize, the competitive position of countries has become increasingly important as it affects a countries growth and development (Ekmen-Ozceijk, 2014). Whilst developed nations have the upper hand in terms of large industrial bases, strong infrastructure and high standards of living, this does not necessarily mean that they always have the competitive advantage. Porter’s diamond suggests that there are four factors that influence competitive advantage: factor endowments, firm strategy/structure/rivalry, demand conditions, and related and supporting industries (Porter, 1990). Whilst he does state that one aspect of the diamond is dependent upon the state of other factors of the diamond, a nation is most likely to succeed within the area of the diamond that is most favourable. This is relevant for developing nations because if a nation were to have a comparative advantage in the production of a certain good, then it is likely to have the competitive advantage over other nations (Beaudreau, 2016). Comparative advantage can be broadly defined as countries taking advantage of their differences (Krugman, 1987). For example manufacturing in China has increased exponentially over the past 20 years due to the low cost, as such China now holds a competitive advantage over other nations and a vast amount of goods manufactured are done so within China. Porter also argues that there are two external factors, chance and government, which impact the national

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