“a Nation’s Competitiveness Depends on the Capacity of Its Industry to Innovate and Upgrade”. Discuss Using Porter’s “Diamond” Framework.

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“A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade”. Discuss using Porter’s “diamond” framework.

Increasingly, corporate strategies have to be seen in a global context. Even if an organization does not plan to import or to export directly, management has to look at an international business environment, in which actions of competitors, buyers, sellers, new entrants of providers of substitutes may influence the domestic market. Information technology is reinforcing this trend. Michael Porter introduced a model that allows analyzing why some nations are more competitive than others are, and why some industries within nations are more competitive than others are, in his book The Competitive Advantage of Nations. This model of determining factors of national advantage has become known as Porters Diamond framework. Four attributes of a nation comprise Porter's "Diamond" of national advantage. They are: factor conditions, demand conditions, related and supporting industries, and domestic rivalry. This essay will explain the reasons that Japan achieves one of the most prominent and largest automotive industries with the tools of diamond framework. Factor Endowment

Factor conditions refers to inputs used as factors of production – such as labour, land, natural resources, capital and infrastructure. This sounds similar to standard economic theory, but Porter argues that the "key" factors of production (or specialized factors) are created, not inherited. Specialized factors of production are skilled labour, capital and infrastructure. The spread of higher education in Japan provide a large number of skilled workers, engineers, designers for car companies. Specialized factors involve heavy, sustained investment are difficult to duplicate. This leads to a competitive advantage, because if other firms cannot easily duplicate these factors, they are valuable. The unique technology of Li-ion remains Japanese hybrid car high...
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