Finland and Nokia

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Michael Porter in his article “The-competitive-advantage-of-nations-(1990)” discusses how a firm or a region can build competitive advantage and strategy. Porter argues that Competitive advantage is often not an outcome of favorable factor and macro-economic conditions as classical economists insists. A nation’s competitiveness depends on the ability of its industries to innovate. Porter introduces the concept of “the diamond of national advantage” - a system that some nations establish for its industries that facilitates innovation by companies within the industry. The four broad attributes of a nation that constitutes the “diamond” are factor conditions, demand conditions, related and supporting industries and firm strategy, structure and rivalry.

In the article “Finland-and-Nokia:Creating-the-World’s-Most-Competitive-Economy” the authors showed how Finland created the diamond of national advantage ensuring the emergence of the Finnish Telecommunications cluster that facilitated Nokia’s innovation and world leadership. The competitive landscape within Finland (non-monopolized telephone network to prevent the Russians from taking over the system), export-centered economy with important links with Russia, Sweden, Germany and the US and strong network between companies, financial institutions and government favored intense rivalry among firms. Stable market oriented government and sophisticated public education and university system ensured favorable factor conditions while Finland’s top position in mobile phone adoption ensured favorable domestic demand conditions. Development of related and supporting industries was brought about by the introduction of Nordic Mobile Telephone Network (NMT) through technical cooperation of the Nordic countries in 1981. NMT created the world’s largest single mobile market that expanded rapidly and attracted a number of private operators and manufacturers. Concurrently government intervention with a series of policy changes and...
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