According to Porter (2004), factor conditions are factors of production such as labour, land, natural resource, capital and infrastructure. Moreover, a disadvantage might be an advantage. Local disadvantages in factors of production force to innovate to over come their problems. This innovation often results in a national comparative advantage. The big number of population in China provides retailers with a huge and cheap labour power. Furthermore, according to Day (1996), many foreign investors had experienced difficulties in sourcing products in China such as basic raw materials and components due to the poor and unsteady quality, late deliveries and shortage of quantity with local suppliers in the past. However, following with foreign investment and government’s capital, suppliers are getting more competitive. China becomes the most popular outsourcing provider.
A sophisticated domestic market is an important element to generate competitiveness. When the local firms face a sophisticated market, they need to keep improving their product because the saturated market demands high quality products. In the last 20 years, China’s consumer were lacking in the knowledge of products because the low education and the sequel of the Cultural Revolution. Nevertheless, China’s economics is growing and consumers are also getting more sophisticated and demanding (Kwan, Yeung and Au, 2003). As a result, the high demanding market pushes retailers to innovate. Furthermore, because of the cheap labour, more and more outsourcing firms come to China to cut down their cost. Come along with the high demand, China rises their technique level and provides more skillful labour to attractive foreign firms.
2.3Related and supporting industries
Porter (2004) argues that a set of strong related and supporting industries is important to the competitiveness of firms. When local supporting industries are competitive, firms will gain...