Porter's Competitive Advantage Of Nations

1) Introduction Competitive Advantage of Nations by Michael Porter (1990) is a largely reputable yet often criticised work. The framework of competitiveness by Porter explained the achievements of industries and their contributions to the success of nations. Firstly, the concept of National Competitiveness and the diamond model will be briefly explained. Secondly, the varying criticisms of Porter’s theory by other academics will be discussed. Lastly, this paper will debate on whether Porter’s theory is effective and identify some of the missing dimensions in his framework.

2) Concept of National Competitiveness The constant public debate surrounding National Competitiveness has existed for a long time. According to Reinert (1995),

For instance, specialised technology in an industry is one of the factors that contribute to the sustainable competitive advantage for that certain industry. On the other hand, simple and generic factors such as low cost raw materials are normally inherited and duplicated easily. Therefore, firms may be pushed to innovate and improve when there is lack of basic resources while excessive resources may lead to a firm’s complacency and unproductivity. b) Demand Conditions Home Demand conditions, which are key to global achievements, are not determined by the size of demand but by the appeal that creates the resulting difference. Complex and tough home consumers enable the company to identify consumer needs and satisfying those needs increases the company competitiveness worldwide. Low domestic demand results in companies venturing overseas markets and implementing a worldwide strategy to compensate the shortage in home demand conditions. c) Related and Supporting

The nature of competition and local rivalry holds the ultimate impact on the global competitiveness of nation’s companies. Domestic rivalry serves as a vital incentive to the formation and determination of competitive advantage as domestic rivalries over market share usually penetrates beyond business competition and becomes personal. This is a crucial factor that seldom yields from competition with overseas companies. Inevitably, local competition eliminates the shared benefits that arises from the same home nation and drives firms to push beyond those existing benefits to create more sustainable advantages. Porter (1990) stated that geographic concentration increases the intensity of local