Does it adequately explain the means by which specific nations have achieved economic success?

Porter’s ideas on competitive advantage can be cited in his many publications beginning in the late 1970’s. Most notably his models of industry analysis such as Porter’s five forces model (Porter, 1979) and on a more macro perspective the Diamond model of analysis, which aims focus on ‘National’ competitive advantage breaking down micro factors and provide scope on a number of micro industry factors.

Porter published arguably his most notable work in 1990 titles The Competitive Advantage of Nations, in which he developed ideas on the firm and its relation to the market that was he shed light on in the publication How competitive forces shape strategy (1979). Porter goes on to provide an understanding as to how nations can achieve national sources of competitive advantage. The factors he draws focus to are the micro factors, which determine competitiveness, such as that of government, supporting industries and resource factor conditions to name a few.

This assignment attempts to assess Porters ideas on national competitive advantage and whether or not they provide adequate and well-rounded explanations regarding specific nations economic success. It would be short sighted to assume that Porter has covered all the areas of competitive advantage strategy, especially when the main focus has mainly been trained on the firm and the region. Porter’s ideas can offer good analysis of industry level, regional competitiveness and ways of analyzing the strengths of these respective areas. As Porter’s work was created as far back as 1979, it is important to apply them to modern forces of globalization, technology and practices of deregulation. Porter’s insight into the influence of technology seem scarce, this will be considered later as we develop discussion about Porter’s literature and how it.

In approaching the issue of national competitive advantage, I intend to look at Porters ideas in the broader context of theories and key thinkers on the topic. Looking at intellectual critique of Porter’s work, the relevance it holds to major developing nations and the forces, which have key influence over national competitiveness. I will look for broader critique of Porters ideas and other ideas which have stemmed from his literature, such as Rugman who offers alternative or additional models, such as the double diamond model (Rugman, 2002). Porter’s idea’s on National competitive Advantage is found in ‘The Competitive Advantage of Nations’ (1990). It is widely recognized by many as the management bible, including countries such as Australia, New Zealand, and Portugal to mention a few. It has also been met with exhaustive critique in the face of globalization, knowledge intense industry that has in turn led to high standards of innovation and general standard of living.

The Diamond model of National Advantage analysis is major feature of The Competitive Advantage of Nations (1990) not to mention Porters work as a whole. The model comprises of four determinants which are country specific complemented by two external variables. These are linked dependently upon each other, represented in a diamond formation, which supposedly constitute the factors, which are responsible for national competitive advantage. As this is largely relative to the country or area under analysis it has come under some criticism by the international community. It is argued that it neglects some key factors, which will be discussed in the main body and analysis of this piece.

Analyzing ‘economic success’ can be interpreted in many different ways, not to mention the ways in which we measure it. Economic well-being has been seen by some as the “independence from government assistance, being out of poverty, and freedom from material hardship” (Meyer, 2004). Porter argues, “The concept of competitiveness at the national level is productivity. The Principal goal of a nation is to produce a high and rising standard of living for its citizens” (Porter, 1998). Porter goes on to argue that productivity is key to an economy, which intends to be constantly upgrading itself and advance in its key industries. He suggests a link between standards of living and the level of productivity, implying that the former is largely dependent on the latter.

Explanations for how and why two countries become successful in its economic development are never identical. Many Factors determine the path it takes to development, maturity and finally mass consumption (Gerschenkron, 1962). I intend to look at Porter’s explanations and key ideas and contrast them with other key thinkers such as Gershenkron, Rugman and moving on to focus on recently developed and developing nations. Porter offers specific case studies in his literature, which support his theories examples being ‘How the Diamond works: The Italian Ceramic Tile Industry (Enright & Tenti) which Porter uses in his book ‘On Competition’ 1998 which we will look into critically in the course of this paper.