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 companys
competitiveness.

Evaluating Porters 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 homecountry, although not always in
the best interests of the firm.
Even though, many firms
promote open markets.