Competitive Advantage of
Nations and Trans-national
Management
Mikkeli 2005
Compiled by Rulzion Rattray
The Macro Environment
POLITICAL
ECONOMIC
SOCIETAL
ENVIRONMENTAL
TECHNOLOGICAL
VALUES/LIFE-STYLE
INEVITABLES
TRENDS
UNCERTAINTIES
Details and focus of analysis will depend on the
industry that is being investigated & should be linked
to forces that drive competition in that industry
Structural Analysis of Industries
Michael Porter
Potential
Entrants
Threat of entry
Bargaining
Suppliers
Power
Industry
competitors
Rivalry
Bargaining
Power
Threat of substitutes
Substitutes
Buyers
The Resource Environment
The Value Chain Michael Porter (1985)
Firm’s Infrastructure
Human Resource Management
Secondary
Activities
Technology Development
Procurement
Inbound
Logistics
Outbound
Operations
Logistics
Marketing Service
& Sales
Primary Activities
Resource Environment
The Value Chain Michael Porter (1985)
Firm’s Value
chain
Supplier
value
Channel
value
Customer
value
chains
chains
chains
Generic Competitive Strategies
Michael
Porter 1985
Competitive Advantage
Broad
Cost
Leadership
Competitive
Scope
Narrow
Cost
Focus
Differentiation
?
Differentiation
Focus
Adapted from M.E. Porter Competitive Advantage, Free Press, 1985. Cited in Thompson, J L, (2002),
Strategic Management. 4th Ed, Thomson Learning. Pp 305.
21/10/97
Compiled by Rulzion Rattray
3
Porter’s Diamond
Government
Structure &
Rivalry of Firms
Factor
Conditions
Porter Contends that a
nation's characteristics
have a major impact
on its firms performance.
Demand
Conditions
Related and
Support Industry
Chance
Adapted From: Porter, M.E., (1990), The Competitive Advantage of Nations,
Free Press, Cited in de Wit, B & Meyer, R, (1998), “Strategy Process, Content
Context, an International Perspective” 2nd Ed, West.p, pp 775.
Home Diamond
(Porter, M.E. 1990)
Firm Strategy
Structure, & Rivalry
• Do management & organisational
structures in nation match industry needs?
• Does industry attract outstanding talent?
• Do investors goals meet industry needs?
• Are there capable domestic rivals?
Factor conditions:
• Does the nation have advanced
factors of production?
• Are there advanced factor creating
mechanisms? E.g. 1st rate University
research, Top grade Universities.
• Are selective factor conditions
indicators of foreign circumstances?
Demand conditions:
• Are the nations buyers sophisticated
& demanding?
• Does the nation have unusual needs?
• Do home \customer needs emulate
those elsewhere?
• Does the nation have sophisticated
distribution channels
Demand conditions:
• Does the nation have world-class
supply industries
• Are there strong related industries
Adapted From: Porter, M.E., (1990), The Competitive Advantage of Nations, Free Press, Cited in de Wit, B & Meyer, R,
(1998), “Strategy Process, Content Context, an International Perspective” 2nd Ed, West.p, pp 775.
Development of Silicon Valley
+
+
More skilled
labour.
Presence
of Excellent
Universities
+
+ 5
+
1
Presence
of skilled
labour
force.
+
Additional
support firms
2 +
Incoming
electronics
firms.
+
4
Component
manufacturers
attracted.
Drawn by Rulzion Rattray.
+
3
Trans-national Management
• Trans-national MNE’s: Degree tested by
trans-national index, ratio of:
– Foreign assets to total assets
– Foreign sales to total sales
– Foreign employment to total employment.
• Highest ranked:
– Nestle; no US firms in top 10
• Largest MNE General Electric, but this
only 75th on TNI index.
Competitive Advantage of MNE’s
• Pepsi profitable in Soviet Union; despite
lack of foreign exchange. Took Russian
Vodka in payment.
• Proctor & Gamble entered China in 1980’s
but only became profitable in mid 1990’s.
• Key Issue of Learning, (Hamel, G. Prahalad,
C.K., 1993).
– MNE’s Choose to compete in difficult markets
in order o upgrade and develop competence
and capabilities, i.e. to learn?
References
• de Wit, B & Meyer, R, (1998), “Strategy Process, Content &
Context, an International Perspective” 2nd Ed.
• Ginter P & Duncan 1990, Macroenvironmental Analysis, Long
Range Planning, December 1990.
• Hamel, G. Prahalad, C.K., (1993), Strategy as Stretch & Leverage,
Harvard Business Review, vol. 71 no. 2.
• Porter ME 1979, “How Competitive Forces Shape Strategy”,
Harvard. Business Review March/April 1979.
• Porter ME 1985, Creating & Sustaining Superior Performance, Free
Press.
• Porter, M.E., (1990), The Competitive Advantage of Nations, Free
Press, Cited in de Wit, B & Meyer, R, (1998), “Strategy Process,
Content & Context, an International Perspective” 2nd Ed.
• Stacey, R, 1996, Strategic Management & Organisational
Dynamics, Pitman, London.
• Whittington R., (1993), What is Strategy & does it matter?,
Routledge.