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Heinz Weihrich: Professor of Global Management and Behavioral Science, University of San Francisco, California, USA
Porter's determinants of national advantage
Harvard University Professor Michael Porter suggested the need for a new paradigm for analyzing the state of a country in his book, The Competitive Advantage of Nations. Specifically, he identified four determinants of national advantage:
- (1) the factor conditions of a nation, such as the infrastructure and the availability of skilled labor;
- (2) the demand conditions, which refer to the home country's demand for products and services within an industry;
- (3) the presence or absence of related and supporting industries necessary for being competitive in the global market; and
- (4) the firm's strategy, structure, and rivalry with other companies that influence how firms are established, organized, and managed (the nature of the rivalry affects the competitive advantage of industries and nations) (Porter, 1990).
Porter's factor determinants of national advantage relate closely to a nation's strengths in industrial production and, consequently, to its leading industries. Therefore, trends in these determinants also predict to a great extent the nation's industrial competitiveness.
While Porter made valuable contributions in identifying important factors that contribute to national advantage, certain facts may not be supported by his model. For example, he suggests that the geographic concentration of industries is vitally important. Porter mentions that the German automobile industry has become competitive due to the proximity of the supportive industry around the cities of Stuttgart, Munich, Ingolstadt, Neckarsulm, and Regensburg (Porter, 1990). While it is true that car companies such as Mercedes, BMW, and Porsche are located in these areas, the largest European firm, Volkswagen, is not located near those cities, nor are the plants of the Ford Motor Company and General Motors' Opel firm. Therefore, Porter's model has only limited validity with respect to the importance of geographic concentration in the German car industry.
Although Porter's model provides a useful framework for analyzing the environment, especially the economic one, it does not require government policy makers to develop responsible alternative strategies that create and maintain a competitive advantage for their nations. His analysis of the competitive situation is mainly descriptive and does not necessarily result in the formulation of alternative strategies.
A different analysis for developing a...