While at a single point in time a firm prefers less rivalry, over the long run more local rivalry is better since it puts pressure on firms to innovate and improve.
The strategies help in setting new goals, the structure helps in managing operations, and rivalry helps in generating innovative ideas in organizations.
For example, South Korea lacks natural resources, but have specialized engineers. In fact, high local rivalry results in less global rivalry.
Adverse conditions such as labor shortages or scarce raw materials force firms to develop new methods, and this innovation often leads to a national comparative advantage.
Italian companies tend to be smaller and are run more like extended families. According to Porter, these dimensions interact with each other and help in increasing the competitiveness of the organizations.
Encourage companies to raise their performance, for example by enforcing strict product standards. Include the inputs necessary for producing goods and services. If the demand of a product is more in the domestic market then it can influence the demand of customers in the foreign market.
Involve industries in the country that are considered as the leader of a particular product. These factors are called the determinants of the national advantage.
Varies from country to country. Micheal Porter gave the diamond theory of national advantage, which states that the features of home country are crucial for the success of an organization in the international markets.
The discussion of these determinants is as follows: Supporting Industries The individual points on the diamond and the diamond as a whole affect four ingredients that lead to a national comparative advantage. It describes the factors that contribute to the success of organizations in global industries.
For example, German companies tend to be hierarchical.
However, there may be countries that have advanced and specialized factors but lack in the basic factors. Japan has a relatively high number of electrical engineers per capita.
These four determinants can also be called as the dimensions of the diamond model that help in contributing to the national advantage. Japanese firms achieved dominance is this industry for the following reasons: Stimulate early demand for advanced products. The book concludes with implications on company strategy and national agendas.
The skilled personnel form the part of specialized factors. Local rivalry forces firms to move beyond basic advantages that the home country may enjoy, such as low factor costs. If a country is endowed with all these factors of production, it would be successful in the global market.
A strong, trend-setting local market helps local firms anticipate global trends. For example, factor disadvantages will not lead firms to innovate unless there is sufficient rivalry. He then applies the diamond to examples in both manufacturing and service industries, and uses the value chain to explain the growing role of services.
The Japanese market was very demanding because of the written language. The stock of factors at a given time is less important than the extent that they are upgraded and deployed. Stimulate local rivalry by limiting direct cooperation and enforcing antitrust regulations.
The basic factors to carry out a business include natural resources and labor; whereas, advanced factors include infrastructure, such as communication systems.
For instance, the growth and development of the automobile industry would enhance the growth opportunities of the steel industry. For example, a high level of rivalry often leads to the formation of unique specialized factors. Focus on specialized factor creation.
The strategies, structures, and rivalry are very important for the success of an organization.This theory is called the diamond theory, as it is depicted in the shape of a diamond framework.
Micheal Porter gave the diamond theory of national advantage, which states that the features of home country are crucial for the success of an organization in the international markets. For example, South Korea lacks natural resources, but.
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