2. Productivity for INTERNATION TRADE Competitiveness
The rapid changes in the context of the process of economic reform,…show more content… Traditional country advantages
Traditionally, economic theory mentions the following factors for comparative advantage for regions or countries:
1. Land 2. Location 3. Natural resources (minerals, energy) 4. Labor, and 5. Local population size.
Because these 5 factors can hardly be influenced, this fits in a rather passive (inherited) view regarding national economic opportunity.
Porter says that sustained industrial growth has hardly ever been built on above mentioned basic inherited factors. Abundance of such factors may actually undermine competitive advantage! He introduces a concept called "clusters" or groups of interconnected firms, suppliers, related industries, and institutions, that arise in certain locations.
Porter Diamond Nations
According to Porter, as a rule competitive advantage of nations is the outcome of 4 interlinked advanced factors and activities in and between companies in these clusters. These can be influenced in a pro-active way by government.
PORTER argued that a nation can create new advanced factor endowments such as skilled labor, a strong technology and knowledge base, government support, and culture. PORTER used a diamond shaped diagram as a basis of a framework to illustrate the determinants of national advantage. The diamond represents the national playing field that the countries establish for their