Porter's Diamond
Over the past 50 years, U.S. foreign trade has increased significantly. In fact, in 2006, the U.S. imported over $2,204,225 (value in millions of dollars) from foreign producers (U.S. Census Bureau, Foreign Trade Division, 2007). As consumers in the United States, we have become familiar the reputations of certain goods based on their country of origin. Some examples include Swiss-made watches, German automobiles, Tulips from Holland, Argentine beef. Michael Porter uses his "Porter 's Diamond" theory to explain why some countries have a comparative advantage in relation to others in specific industries. Porter theorizes that four broad attributes (factor endowments, demand conditions, relating and supporting industries, and firm strategy, structure, and rivalry) of a nation shape the environment in which local firms compete, and these attributes promote or impede the creation of competitive advantage (Hill, 2008). The following paragraphs will attempt to explain this theory as it applies to the beef industry in Argentina.
The country of Argentina has historically had a comparative advantage in the beef industry. The first of Porter 's attributes used to explain the theory is factor endowments. Factor endowments consist of a nation 's position in factors of production such as skilled labor or the infrastructure necessary to compete in a given industry (Hill, 2008). Two of the basic factors in Argentine beef production are its climate and its extensive grasslands which help contribute to the country 's low cost of production (Carter, 1997). The favorable climate and extensive grasslands not only supported the space for large herds of cattle, but also the fertile land helped to support the farming of grain and corn used to feed the cattle. Another factor endowment, which can be considered a more advanced factor, is the well developed, flexible and transparent livestock marketing system (Carter, 1997). In this case, a open, or transparent marketing
The country of Argentina has historically had a comparative advantage in the beef industry. The first of Porter 's attributes used to explain the theory is factor endowments. Factor endowments consist of a nation 's position in factors of production such as skilled labor or the infrastructure necessary to compete in a given industry (Hill, 2008). Two of the basic factors in Argentine beef production are its climate and its extensive grasslands which help contribute to the country 's low cost of production (Carter, 1997). The favorable climate and extensive grasslands not only supported the space for large herds of cattle, but also the fertile land helped to support the farming of grain and corn used to feed the cattle. Another factor endowment, which can be considered a more advanced factor, is the well developed, flexible and transparent livestock marketing system (Carter, 1997). In this case, a open, or transparent marketing
References: Carter, S. (1997). A competitive Analysis and Strategy. Global Agricultural Marketing Management. Rome, Italy: Food and Agriculture Organization of the United States. Hill, Charles W.L. (2008). International Trade Theory. Fifth Edition. Global Business Today (pp. 155-189). New York, NY: McGraw-Hill Companies Steiger, Carlos. (2006). Modern Beef Production in Brazil and Argentina. Retrieved September 15, 2007 from Choices – The magazine of Food, Farm, and Resource Issues at http://www.choicesmagazine.org/2006-2/tilling/2006-2-12.htm U.S. Census Bureau, Foreign Trade Division. (June 8, 2007). U.S. Trade in Goods and Services - Balance of Payments (BOP) Basis. Retrieved July 15, 2007 from U.S. Census Bureau, Foreign Trade Division at http://www.census.gov/foreign-trade/statistics/historical/gands.txt