International Business Lecture No,24 By Dr.Shahzad Ansar

Advanced Factor Endowments More likely to lead to competitive advantage. Are the result of investment by people, companies, government.

Relationship of Basic to Advanced Factors Basic can provide an initial advantage. Must be supported by advanced factors to maintain success. No basics, then must invest in advanced factors.

Demand Conditions Demand creates the capabilities Look for sophisticated and demanding consumers. impacts quality and innovation.

Related and Supporting Industries Creates clusters of supporting industries that are internationally competitive. Must also meet requirements of other parts of the Diamond.

Firm Strategy, Structure and Rivalry Management ‘ideology’ can either help or hurt you. Presence of domestic rivalry improves a company’s competitiveness.

Evaluating Porter’s Theory If Porter is right, we would expect his model to predict the pattern of international trade that we observe in the real world. Countries should be exporting products from those industries where all four components of the diamond are favorable, while importing in those areas where the components are not favorable. Too soon to tell.

Implications for Business Location implications: makes sense to disperse production activities to countries where they can be performed most efficiently. First-mover implications: It pays to invest substantial financial resources in building a first-mover, or early-mover, advantage.

Implications for Business Policy implications: promoting free trade is generally in the best interests of the home-country, although not always in the best interests of the firm. Even though, many firms promote open markets.