National comp advantage revealed in strong net exports and strong net FDI

National comp advantage revealed in strong net

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National comp. advantage revealed in strong net exports and strong net FDI positions Superior capabilities at firm-level are not created in a vacuum. Domestic environment has implications for firms’ capacity to create them. At both the firm and national levels, competitive advantage grows out of innovation. “Creating competitive advantage in sophisticated industries demands improvement and innovation — finding better ways to compete and exploiting them globally, and relentlessly upgrading the firm’s products and processes. Nations succeed in industries if their national circumstances provide an environment that supports this sort of behaviour. Factor conditions Given or basic factors - endowments e.g. natural resources, land, geography and climate Created or advanced factors - increasingly more important E.g. highly skilled labour, a strong technology and knowledge base (R&D labs, universities) strong industry associations; high value adding and difficult to imitate Demand conditions - refers to the size and growth of domestic demand More importantly, sophisticated demand (“seek out the most demanding customers”) and demand that precedes demand in other markets. Sophisticated and demanding buyers exert pressure on firms to excel in quality and thus helps in sustaining the acquired advantage E.g. coffee in Melbourne, air conditioners in Japan
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LISA YANG IBUS20002 Business in the Global Economy Strategy and rivalry Strong domestic competition tends to spur all companies to cut costs, improve quality and to innovate. Domestic competition for market share, but also for human talent, technical leadership and superior product quality. These pressures have allowed Italy to emerge as one of the world’s leading countries in design. Examples: Italy in design, America in finance, Germany in luxury cars, … Related and supporting industries Help companies to build competitive advantage E.g. suppliers of specialised inputs such as components, production machinery, services and consulting. Makers of complementary products or other industries related by skills, customers, technologies or common inputs. E.g. sensors, robots, etc. for automotive industry => Notion of “clusters”. Silicon Valley; pharmaceutical cluster in Switzerland; footwear industry in Pusan, South Korea; IT industry in Bangalore, India; fashion cluster in northern Italy Porter’s “Diamond” of nat. competitive adv. National competitive advantage does not derive entirely from the store of a country’s natural resources Implies that any country, regardless of its initial circumstances, can attain economic prosperity by systematically cultivating new and superior factor endowments → provide infrastructure / stimulate demand Ideally, all four of these diamond components are strong, and reinforce one another E.g. strong rivalry makes for more discerning customers, and supports more related and supporting
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