INTERNATIONAL MARKETING-A

Under the guidance of

Prof. Ashish K. Banerjee

Article: The Competitive Advantage of Nations

by Michael E. Porter

Group 4 Submission:
Names Reg. No.s
Avantika Tijare MBA0016/57
Niharika Prajapati MBA0045/57
Kalyani Gajewar MBA0188/57
Aiswarya Kumar MBA0247/57
Shubham Hinge MBA0270/57
Grishma Borkar MBA0418/57

Que- What is the original contribution of the authors

in the field of international marketing strategy?
In the research article, it has been mentioned that generally companies and the government
misperceive the true sources of Competitive Advantage of a Nation.
The author further says that Competitive advantage is achieved through the acts of
Innovation wherein you enter an entirely new market or start serving a market segment that
was ignored by competitors. Only way to sustain competitive advantage is to upgrade it. For
example, Japan entered the US market with small and compact cars to target the untapped
segment of customers and then built large plants for achieving economies of scale.
The author ascribes that the only source of competitive advantage is productivity. It is not
Cheap labour or the abundance of natural resources as misunderstood by most of the
companies and governments.

For sustaining competitive advantage 2 things should be done:

1. Adopt a global approach
2. Creating more sustainable advantage - Make existing advantage obsolete

Michael Porter dismantles traditional economic assumptions regarding how well a country
does in global competition in his article. Porter proposes a diamond-shaped model for
thinking about national productivity that emphasises active and adaptable business
characteristics rather than passive and unchanging geographic properties.

Earlier a country's level of performance in comparison to its neighbours was determined by

the economic theory of comparative advantage. Five relatively immutable elements
determine a nation's ranking in this version of national growth: land, location, natural
resources, labour, and population size and trends. According to Porter, evaluating national
competitiveness in this light supports the notion that global economic potential is something
to be passively observed. Instead, he recommends a completely different way of thinking.

There is no such thing as national production, according to Porter, at least not in any
significant sense. Countries, after all, do not compete with one another in this way;
corporations do. This means that in order to understand national competitiveness, one must
begin with individual company performance and aggregate these solitary results into
"clusters" – groups of firms that are interconnected because they are in related industries,
suppliers to each other, or are geographically linked. When these clusters and their relative
productivity are used to evaluate national advantage, it follows that a country's businesses
must constantly improve themselves through innovation, increased productivity and
efficiency, and improved product quality and differentiation, and that the government's role
is to encourage this continuous improvement.

A four-factor system is used in Porter's Diamond model to forecast or evaluate cluster

activities:

1. Strategy, Structure, and Rivalry in the Firms

A company's structure and business strategy must align with the local business climate in
order for it to grow. This also implies that it is direct competition with other businesses that
motivates each company to use its expertise and resources to boost innovation and
productivity in order to outperform its local competitors. When a group of enterprises is
exposed to this type of stimuli, the cluster thrives.

2. Market Demand Conditions

When clients in a local market expect high-quality, unique items, businesses that try to meet
those demands will be pushed to innovate in order to survive. As a result, a company that
succeeds in a competitive and aggressively demanding local market will also succeed in the
global market since its products have been fine-tuned.

3. Supporting and Related Industries

For parts, raw materials, and information exchange, all organisations rely on suppliers to
some extent, and most companies engage in this cycle as both suppliers' customers and
suppliers themselves. When a company's supply chain firms are productive, high-quality
enterprises with the potential to prosper in both the local and global market, the company's
efficiency, productivity, and innovation will improve as well.

4. Situational Factors
Of course, the natural resources, infrastructure, people skills, capital, and land available to
a certain cluster, as well as a country as a whole, are important. Porter emphasises the
"specialist components" of trained labour, capital, and infrastructure, which are more
difficult to develop fast due to their long-term investment and cultivation requirements. As
a result, clusters with access to these specialised elements have a competitive edge over those
who do not. Resources and land, on the other hand, are easier to work around through trade
or technological improvements, therefore they have less impact on competitive advantage.

Porter claims that the government's role should be to support national competitiveness by
encouraging rivalry and domestic competition, as well as promoting strict environmental
and safety regulations – all of which should result in extremely high-quality products that
can compete successfully in the global marketplace. Simultaneously, Porter recommends
businesses to never shy away from problems or innovations, but rather to strive to improve
their strategy and products. All of this should work together to stimulate other industries
and create jobs.