For instance the italian shoe industry benefits from

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For instance, the Italian shoe industry benefits from a highly competent pool of related businesses and industries, which has strengthened the competitiveness of the Italian shoe industry world-wide.
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This effect is strengthened when the suppliers themselves are strong global competitors. 4. Firm Strategy, Structure, and Rivalry National performance in particular sectors is inevitably related to the strategies and the structure of the firms in that sector. The structure and management systems of firms in different countries can potentially affect competitiveness. For example, German firms are oftentimes very hierarchical, which has resulted in advantages within industries such as engineering. In comparison, Danish firms are oftentimes more flat and organic, which leads to advantages within industries such as biochemistry and design. Competition plays a big role in driving innovation and the subsequent upgrade of competitive advantage . Since domestic competition is more direct and impacts earlier than steps taken by foreign competitors, the stimulus provided by them is higher in terms of innovation and efficiency. If rivalry in the domestic market is very fierce, companies may build up capabilities that can act as competitive advantages on a global scale. Home markets with less rivalry may therefore be counterproductive, and act as a barrier in the generating of global competitive advantages such as innovation and development. As an example, the Japanese automobile industry with eight major competitors ( Honda , Toyota , Suzuki , Isuzu , Nissan , Mazda , Mitsubishi , and Subaru ) provide intense competition in the domestic market, as well as the foreign markets in which they compete. By using Porter's diamond, business leaders may analyze which competitive factors may reside in their company's home country, and which of these factors may be exploited to gain global competitive advantages. Business leaders can also use the Porter's diamond model during a phase of internationalization, in which leaders may use the model to analyze whether or not the home market factors support the process of internationalization, and whether or not the conditions found in the home country are able to create competitive advantages on a global scale. Finally, business leaders may use this model to asses in which counties to invest and to assess which countries are most likely to be able to sustain growth and development.
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The Diamond of National Advantage Theory has two main limitations: The existence of the four favorable conditions does not guarantee that the industry will develop in a given locale. Entrepreneurs may face favorable conditions for many different lines of business. In fact, comparative advantage theory holds that resource limitations may cause a country’s companies to avoid competing in some industries even though they may have an absolute advantage.
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  • Fall '01
  • Mussot
  • International Trade, import substitution, John D. Daniels, Lee H. Radebough

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