GOVERNMENT INCLUSION

IN PORTER’S DIAMOND:
THE CASE OF ARGENTINA

SYNDICATE V
29321342 - M Reminton Helmi Aqil F
29321375 - Minaco Rino
29321332 - Mohammad Effendi
29321410 - Muhammad Reza H
29321309 - Muhammad Ridyanto
PERTAMINA EP 29321532 - Muhammad Wisnu Badri D
OUTLINE

1 Materi Sharing Knowledge OUTLINE

2 Dokumen Review/Approval
01 BACKGROUND

3 Penyusunan Design Criteria

4 Estimasi Man Hour Review
02 PORTER’S DIAMOND FOUR DETERMINANTS IN ARGENTINA

5 Penyusunan Agenda Pre-KOM

03 PDRI
6 Sharing Session
QUESTION 1

04 QUESTION 2

05 QUESTION 3

06 QUESTION 4
BACKGROUND
1.1 Development of international markets is crucial for the growth of business. Porter’s (1990) Determinants
of International Country Attractiveness model (or the Porter “diamond” model) has been the standard
used to determine “where” firms should expand internationally.

2.2 Government doesn’t included as the fifth determinant

in the model because its role is to influence the other Strategy, Structure,
Rivalry
four determinants. In countries where industries are
state owned, the role of government becomes quite
important. State ownership results in industries being
controlled by international government and thus Related &
changes the role and power of government in these Factor Conditions Supporting
Industries
instances.

3.3 Porter’s diamond model with the role of government

Governm
as a “catalyst”. Argentina was selected for analysis ent Roles
Demand Conditions
because it is a developing country and
many industries are state owned.

PORTER’S DIAMOND MODEL

PORTER’S
DIAMOND
“FOUR
DETERMINANTS”
IN ARGENTINA
DEMAND CONDITION
Demand conditions are characterized by the size of markets in international countries

Within Argentina, economies of scale may be difficult to obtain. With

the existence of high unemployment and a low level of GDP/capita
($5,498), production facilities may not be fully utilized because low
levels of demand exist.

What should Government do?

Establishing
more jobs Produce new product
1 to increase
Lowering competitiveness
Product
trade barriers
research &
development
Providing (R&D)
opportunities generate products at
2 lower costs
from direct
foreign
investment
RELATED & SUPPORTING
INDUSTRIES
Related and supporting industries: Establishing positions within related and supporting
industries provides for economies of scope at the firm level.

cost savings
created by the firm
Develop related & successfully
supporting transferring some Increase
0 0
industries of its capabilities productivity &
1 2
(supplier) within that were economic value
region related developed in one
business to
another

● As members of the Mercosur Trading Bloc who implemented low

trade barriers, Argentina could sell products to other alliance
members thereby using excess capacity.

● Entrepreneurship centers in Argentine universities, as well as the

emergence of business plan competitions for students, are growing
along with governmental initiatives to support entrepreneurship.
STRATEGY, STRUCTURE,
AND RIVALRY
Strategy, structure, and rivalry refer to the competitive environment within an
international country.

● In 2002, The lack of information technology as the impact of government

which doesn’t provide sufficient resources for firm to capitalized upon the
trends of globalization and technology has put many firms in Argentina at a
competitive disadvantage. With high unemployment rates, approximately
1/3 of the population has emigrated to the U.S., Spain, and Italy.
● The “brain drain” of skilled individuals who possess the necessary traits for
new venture creation do not remain. It is crucial for Argentina to retain the
intellectual capital.

What should Government do?

The government could foster educating its superior students in developed countries
such as the U.S. and Great Britain. Because the government is paying for these
individuals to obtain an education in fully developed markets, these individuals would be
required to return to Argentina to run businesses.
FACTOR CONDITIONS
(PRODUCTIONS)
Factor conditions consist primarily of inputs necessary to compete within any industry

CONS
● Argentina lacks the road, rail, and air transportation necessary to reach
their potential for business growth. While the country’s internal market is
large, the geographic distance between major cities remains an obstacle.
● Argentina firms have difficulty reaching well developed-country markets
due to infrastructure limitations.

The firm may need to develop inbound logistics networks to move raw
materials to manufacturing facilities. In addition, firms will need to develop
outbound logistics networks to provide the infrastructure needed to move
products to customers. In many cases, firms will need to develop both
inbound and outbound logistical networks to meet customers’ needs in a
timely manner.

PROS
● Language can be a factor condition which can be leveraged within
international markets, use of the same language may increase intra-
QUESTION 1
The general What are the general characteristic of competitive advantage?
character of (fundamental issues, indicator)?
competitive
advantage is having
a valuable, special
and unique ability /
resources superior to
/ among the peers in
the same market.

Rich Highly Massive Mercosur

Spanish Pro
Natural Literate Agricultural Trading Bloc
Language Privatization
Resources Population Product Member

6 Strategic Pillar of Argentina’s Competitive Advantage

What makes Argentina has the competitive advantage among Mercosur Bloc member???
Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector. These three factors
make Argentina the second-largest national economy behind Brazil. Participating in Mercosur Bloc makes Argentina gain a gift because
Mercosur Alliance has implemented low trade barriers and Argentina can provide the demands within this bloc with the massive
agricultural production that Argentina has. Other factors that enhance Argentina’s chance to gain more competitive advantage are the
Spanish Language (the third most spoken language in the world) and Argentina’s Government Pro with Privatization (by enhancing
private participation can create a multiplier effect in the economic cycle)
 QUESTION 2 What are the government and firm roles to establish competitive
advantage?
•Government as “The Policy Maker”
The government can set policies that attract the private sector to invest more.
These policies can be in monetary policy (control money circulation, lowering
benchmark interest rates, etc) or fiscal policy (by providing fiscal incentives) which
are impact to “ease of doing business” in Argentina so that the economy will grow
as expected.

•Government as “The Facilitator”

As the facilitator, the government has to invest in the infrastructure sector which the
private sector will not be interested in because of the large of capital required, long
payback period, low-profit margin, and categorized as a high-risk investment.

•Firms as “The Doers”

Within the scope of macroeconomics, the firms are set to be “the doers” who
capture the chance in the business. As they participate in economic activities in the
country, they create value, form the market, stimulate the market share among their
peers so that creating multipliers effect that accelerates economic growth within the
country.

In a conclusion, the Government and The Firms have to collaborate and work closely
to create conducive business environment so that the economy can boost and grow
Figure 1.1 Porters Diamond Model
rapidly. The more conducive business environment, the more attractive country will
be in investor perspective so that it will encourage more private sector to participate
in economy.

Notes:
The government‘s role is as a catalyst/braker because they have the power to determine the macroeconomic policy that impacts directly the business condition In a
country. They will influence how the business works, how the related & supporting industries would grow, how the market would respond and formed and other conditions
would be impacted. On the other hand, as the consequences of the government's policies will create a chance which can be executed by the Firms as the doers of the
economy itself, they run the business, creating the market, creating value, and other multipliers effect so that the economy will run and grow. Therefore, the ultimate goal
of creating a competitive advantage for the nation will be more achievable by putting all these factors works simultaneously.
QUESTION 3
Into what extend do you agree or disagree with the policy / strategy ?

Here is the tips

To be internationally competitive, the

government of Argentina shall take the
following steps:
 3.1
Argentina Policy & Strategy Implementation
Domain Findings Agree /
  Policy / Strategy Ideals Solution
(g) (f) Pro(s) Con(s) Disagree
a. Demand Conditions

There are several side effects by

implementing this action. First possibility is
peoples in Argentina may more be attracted
Attract more Argentina could also with their local technology innovation that
a.1 √ firms to conduct provide a low-cost market have
R&D in for multinational firms to thismore local features. Secondly, how far
R&D center will empower Argentina
Agree
Argentina conduct R&D. Resources? There are several cases that this
action ended up with not much benefits
results for such countries.
Government should design such strong
regulation that not detain its
implementation accelerations for
prioritizing its local features as a bold
pathway in conducting such research,
development and innovations in
Argentina.

From a demand
perspective, the
Provide government should One of the main advantages of facilitating
incentives for provide international multinational companies to invest their
multi-national firms with incentive to manufactures in Argentina is to absorb its Government should be very strictly in
local workers, which become one of the making their regulation and policy toward
a.2 √ firms to establish large scale
establish large manufacturing facilities. solution in decreasing their poverty and
unemployment level. But these such
Agree such threats, and also generate a long-
term strategies that effectively can avoid
scale These facilities could opportunities, only for a hard skill jobs, in such poor conditions.
manufacturing provide employment contrast the soft skill jobs were only for
facilities opportunities to reduce their foreign worker
the level of
unemployment
 3.2
Argentina Policy & Strategy Implementation
Domain Findings Agree /
  Policy / Strategy Disagree Ideals Solution
(g) (f) Pro(s) Con(s)
b. Related & Supporting Industries
Build additional
trade
The excess capacity could This mutual benefits relationship depends on
relationships with also Government should maintain its conformity
b.1 √ √ be used to serve new
existing and new members each sides political and economical Agree with others.
Mercosur alliance within Mercosur perspectives.
partners

This ventures can be interpreted as a start-up

companies, despites of their so many
Provide The Government must take advantages in supporting the national Government of Argentina should be directly
incentives to action to provide economic, because of their lack of experience involved in facilitating, educating, inspecting
support the international firms an and knowledge in the business, most start-up and guiding these start-ups. One of the
b.2 √ additional growth incentive to grow have their huge potential of getting failure in Agree solution is by providing more well-advanced
of entre- entrepreneurial activities surviving such business competitions. incubator institution that consists of both
preneurial within Argentina. Moreover, for some start-up that did survive representatives (international firms and
ventures in the business have a less contributions to its Argentina government).
environments and also nations such as their
tax transparence.
 3.3
Argentina Policy & Strategy Implementation
Domain Findings Agree /
  Policy / Strategy Disagree Ideals Solution
(g) (f) Pro(s) Con(s)
c. Strategy, Structure & Rivalry
Government also needs to
take action to retain
intellectual capital as in However,
many
these such government program in
case was a waste of investment
the long run, growth is
Retain and because most
driven by the knowledge educated overseas of the people that been well The government should provide more jobs
attract of managerial resources. going back to give such by its government not and opportunities in order to facilitate
c.1 √ √ intellectual One approach is to send contributions to their Agree these peoples so they can contribute well
capital nations. One of the common
individuals to the United there are only small opportunities reason was their skills, knowledge and expertise.
States and other fully for the to
developed countries that contribute their expertise in their own
have top tier education countries.
programs.
Providing incentives for
firms to invest in Sometimes its very difficult to implement
technology. As technology
Share technology becomes developed, the such activities, because some of the Such incentives should be worthy enough
c.2 technologies were protected by such
√ across and within government could act as Intellectual properties, Agree and still applicable to both sides, for
industries the other some were example create JV partnership with the
conduit for sharing this not shareable by its owners, and the other technology owners.
technology within and rest have its price.
across industries
 3.4
Argentina Policy & Strategy Implementation
Domain Findings Agree /
  Policy / Strategy Disagree Ideals Solution
(g) (f) Pro(s) Con(s)
d. Factors of Production
The government of Argentina should
Infrastructure is key factor establish first its political and economical
of production, without it, goals, targets and accomplishments before
firm from other countries they decide what kind of transportations
will choose other was the most suitable for theirs, because
Develop Not all kind of trasnportation is suitable to
international markets to such developing such infrastructure absorb very
infrastructure for expand. Also, firms are nations like Argentina, there are many huge amount of money, for that such
d.1 √ √ all modes of limited from selling their factors that should be consider in such Agree investment should be well accurately
transportation good and services to other development such as, its geographical and precise.
countries because these geopolitical conditions.
products cannot reach a However, the firm will get their
rail, highway, and /or an opportunities to operate or invest in such
airport. development.

South American countries Origin could shape more solidarity in many

focusing upon increasing ways, however perhaps it could not be
Develop closer the number of Mercosur considered as a strong sustainability Develop and strengthen more on such
trade relations alliance, hence foundation of merging an economic power symbiosis mutualism relationship between
d.2   √ with other international trade within nations in the futures, in this case Agree each countries so this actions will be more
Spanish speaking between member nations language barriers did become an issues in the sustain in the future.
firms may increase. past times, but recently and in the future will
not.
QUESTION 4 What is the most factor that boost the competitive advantage?

Infrastructure Our Perspective

We consider from 6 factors that have been explained on the left
side, we strongly believe that set-up and build Infrastructure is
number one priority for Argentina. However, development in this
Incentive to grow sector shall be directed development that aligned with the
entrepreneurial economy and political goal, hence competitive advantage could be
realized

Retain Intellectual The Quietest Airport in

The World
Capital
“The construction of the airport
is lack of studies with negligence
multi aspect considerations such
as technical, geographics
Incentive to invest in position, economics, downstream
GDP/capita: USD 3.682 (2020) business that related, etc”
technology Mattala Rajapaksa
Airport

Incentive for setting up large

scale manufacturing facilities

GDP/capita: USD 428 (1960)

GDP/capita: USD 59.797 (2020)

Singapore in 1960’s Singapore Now
Incentive to set up R&D
“a giant leap project in one generation led by Mr. Lee
Kuan Yew that transform rural Singapore to Modern
Singapore”
THANK
YOU.
FOR
YOUR
ATTENTION.
Any questions or
discussion?