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Chpt 5r2 - • The diamond is mutually reinforcing...

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Chpt 5.2
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New Trade Theory-Applications Typically, requires industries with high, fixed costs World demand will support few competitors Competitors may emerge because of “ First-mover advantage” Economies of scale may preclude new entrants Role of the government becomes significant Some argue that it generates
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Theory of National Competitive Advantage The theory attempts to analyze the reasons for a nation’s success in a particular industry Porter studied 100 industries in 10 nations Postulated determinants of competitive advantage of a nation were based on four major attributes Factor endowments Demand conditions
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Porter’s Diamond Success occurs where these attributes exist More/greater the attribute, the higher chance of success
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Unformatted text preview: • The diamond is mutually reinforcing Porter’s Diamond Factor Endowments • Factor endowments: A nation’s position in factors of production such as skilled labor or infrastructure necessary to compete in a given industry – Basic factor endowments – Advanced factor endowments Basic Factor Endowments • Basic factors: Factors present in a country – Natural resources – Climate – Geographic location – Demographics • While basic factors can provide an initial advantage they must be Advanced Factor Endowments • Advanced factors: The result of investment by people, companies, and government are more likely to lead to competitive advantage – If a country has no basic factors, it must invest in advanced factors...
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Chpt 5r2 - • The diamond is mutually reinforcing...

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