National Competitive
Advantage
International Business
Strategy
301LON
Unit: 6 Knowledgecast:2
Module Learning Outcomes
• Demonstrate a sound appreciation of current
strategic management concepts
• Communicate an in-depth understanding of the
complexity of the environment and its applications
on decision-making process
• Assess current developments in the organisational
environment and alternative responses related to
strategy
Theories of International Trade and
Investment
Comparative Advantage
• The foundation concept of international trade;
answers the question of how nations can
achieve and sustain economic success and
prosperity
• Refers to the superior features of a country
that provide it with unique benefits in global
competition
• Derived either from natural endowments or
from deliberate national policies
Examples of National Comparative
Advantage
•
France has a superior climate and soil for producing
wine.
•
Saudi Arabia has a natural abundance of oil for the
production of petroleum products.
•
Over time, Japan has acquired a superior base of
knowledge and experience for producing cars.
•
Over time, India has acquired a superior base of IT
workers for producing computer software.
What
are
the
comparative advantages
country?
in
your
New Trade Theory
• Argues that economies of scale are an
important factor in some industries for
superior international performance, even in
the
absence
of
superior
comparative
advantages. Some industries succeed best as
their
volume
of
production
increases.
Example
The commercial aircraft industry has very high
fixed costs that necessitate high-volume sales
to achieve profitability.
Comparative vs. Competitive
Advantage
Determinants of National Advantage
Porter’s Diamond
SOURCE: Adapted with the permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from Competitive Advantage of Nations, by Michael E.
Porter, p. 72. Copyright ©1990, 1998 by Michael E. Porter.
Determinants of National
Advantage
• Factors of production: the inputs necessary to
compete in any industry
– Labor
Land
Natural resources
– Capital Infrastructure
• Basic factors include natural and labor
resources
• Advanced factors include digital communication
systems and an educated workforce
Determinants of National
Advantage (cont’d)
• Demand conditions: characterized by the nature
and size of buyers’ needs in the home market for
the industry’s goods or services
– Size of the market segment can lead to scaleefficient facilities
– Efficiency can lead to domination of the
industry in other countries
– Specialized demand may create opportunities
beyond national boundaries
Determinants of National
Advantage (cont’d)
• Related and supporting industries:
supporting services, facilities, suppliers and so
on
– Support in design
– Support in distribution
– Related industries as suppliers and buyers
Determinants of National
Advantage (cont’d)
• Firm strategy, structure and rivalry: the pattern
of strategy, structure, and rivalry among firms
– Common technical training
– Methodological product and process
improvement
– Cooperative and competitive systems
Evaluate the National Advantage of Brazil?
BRAZIL: A NEW WORLD OF LUXURY BUSINESS OPPORTUNITY
http://www.youtube.com/watch?v=Ju5Wi1wS0is
The Diamond Model and the
Japanese Video Game Industry
• Demand conditions: high customer expectations
in consumer electronics; popularity of role-playing
games
• Domestic rivalry: initially low rivalry for Nintendo
but then well-established electronics firms such as
Matsushita; in 1994, Sony launched PlayStation;
also rivalry from Sega
• Factor conditions: game designers & sound
programmers. 300 training programs designed for
video game-related occupations, and some 170
programs designed for cartoonists, animators etc.
• Related and supporting industries: e.g. learning
about liquid crystal display technology (Mitsubishi
Electric, Ricoh and Sharp)
Selecting location
A crucial step in developing a global expansion
strategy is the selection of potential target
markets.
A four-step procedure for the initial screening
process:
1. Select indicators and collect data
2. Determine importance of country indicators
3. Rate the countries on each indicator
4. Compute overall score for each country
Country Screening
17
Objective: To reduce the number of countries that
warrant in-depth investigation as potential target
markets to a manageable few.
Outcomes: Identification of 5 or 6 of the highest
potential country markets.
Criteria: Market size and growth rate; market
intensity (that is, buying power of the residents in
terms of income level); consumption capacity (that
is, size and growth rate of the country’s middle
class);
country’s
receptivity
to
imports;
infrastructure appropriate for doing business;
economic freedom; political risk.
Specific Considerations
18
• Cultural Similarity with Target Market may
Matter. Some firms target countries that are
“psychically” similar in terms of language and
culture.
• Nature of Information Sought varies with
product/industry. E.g., for farming equipment,
consider countries with much agricultural land
and farmers with higher incomes.
• Targeting a Region may Make Sense. E.g.,
European Union, Latin America
Example measurement indicators
Knowledgecast Summary
• Demonstrate a sound appreciation of current strategic
management concepts
• Communicate an in-depth understanding of the complexity
of the environment and its applications on decision-making
process
• Assess current developments in the organisational
environment and alternative responses related to strategy
Seminar
Regular Assignment
Group Presentation on Environmental audit
Group Activity
Regular Assignment
Group Presentation on Environmental audit