Discuss Porter’s diamond model for international trade.
Answer:Porter’s model is an analysis on the reason behind some nations’ success and others’ failure in international competition. His thesis outlined four broad attributes that shape the environment in which local firms compete and these attributes promote the creation of competitive advantage.
Attributes of Porter’s diamond model for international trade.
· Factor endowments – Characteristics of production were analysed in detail. There are basic factors like natural resources, climate, and location and so on and advanced factors like communications infrastructure, research facilities.· Demand conditions – The role of home demand in improving competitive advantage is emphasised since firms are most sensitive about the needs of their closest customers. For example, the Japanese camera industry which caters to a sophisticated and knowledgeable local market.
· Relating and supporting industries – The presence of suppliers or related industries is advantageous since the benefits of investment in advanced factors of production spill over to these supporting industries. Successful industries within a country tend to be grouped into clusters of related industries.
· Firm strategy, structure and rivalry – Domestic rivalry creates pressure to innovate, improve quality, and reduce costs which in turn helps create world-class competitors.
No comments:
Post a Comment