The Competitive Advantage of Nations, States and Regions

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The Competitive Advantage of Nations, States and Regions

Professor Michael E. Porter Harvard Business School Advanced Management Program April 15, 2009 This presentation draws on ideas from Professor Porter’s articles and books, in particular, The Competitive Advantage of Nations (The Free Press, 1990), “Building the Microeconomic Foundations of Competitiveness,” in The Global Competitiveness Report (World Economic Forum), “Clusters and the New Competitive Agenda for Companies and Governments” in On Competition (Harvard Business School Press, 2008), and ongoing research on clusters and competitiveness. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the permission of Michael E. Porter. Further information on Professor Porter’s work and the Institute for Strategy and Competitiveness is available at Version: April 15, 12pm 20090515 – AMP – final.ppt


Copyright © 2009 Professor Michael E. Porter

Competitive Advantage and Competitiveness



• Competitive advantage resides inside the company • Competitive success depends on company choices

• Competitive advantage resides in the locations in which the company is based • Cluster participation is an important contributor to competitiveness

20090515 – AMP – final.ppt


Copyright © 2009 Professor Michael E. Porter

The Changing Nature of Domestic and International Competition • • • • • • • • • • • Falling barriers to trade and investment Globalization of markets Globalization of capital investment Globalization of company value chains Rapidly increasing stock and diffusion of knowledge Increasing knowledge and skill intensity of competition Value is increasingly concentrated in service functions, not manufacturing activities themselves Shift from vertical integration to relying on outside suppliers, partners, and institutions Rising logistical costs due to costs of energy and emissions Costs in China and India are rising rapidly Competitive upgrading is occurring in many countries

• Improving competitiveness is increasingly essential to a country’s prosperity 20090515 – AMP – final.ppt


Copyright © 2009 Professor Michael E. Porter

Prosperity Performance
Selected Countries
PPP-adjusted GDP per Capita, 2007 ($USD)

$50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000

Qatar ($58,000, 0.92%) United States Ireland Kuwait Canada

Norway ($56,650) Hong Kong Singapore

Australia Taiwan


Sweden UK Finland Japan Germany France Spain Israel New Zealand UAE

Greece South Korea

Slovenia Czech Republic Slovakia Hungary Estonia Lithuania Russia Latvia (12.6%)


Saudi Arabia



Poland Argentina Brazil Chile Malaysia Turkey


$15,000 $10,000 $5,000

Mexico Lebanon

Iran South Africa Thailand Egypt Syria Jordan Pakistan Philippines China (13.0%) Laos India Vietnam Cambodia


$0 2% 4% 6% 8% 10% 12%
Growth of Real GDP per Capita (PPP-adjusted), CAGR, 2000 to 2007 Note: highlighted countries are part of the East African Community (EAC). Source: EIU (2009), authors calculations 20090515 – AMP – final.ppt


Copyright © 2009 Professor Michael E. Porter

What is Competitiveness?
• Competitiveness depends on the productivity with which a nation uses its human, capital, and natural resources. – Productivity sets the sustainable standard of living (wages, returns on capital, returns on natural resources) that a country can sustain – It is not what industries a nation competes in that matters for prosperity, but how productively it competes in those industries – Productivity in a national economy arises from a combination of domestic and foreign firms – The productivity of “local” or domestic industries is fundamental to competitiveness, not just that of export industries

• Nations compete...
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