Porters Approach to Competitive Advantage
Posted On March 30, 2017
Porters approach to competitive advantage.
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Difference between Value Chain, 5 5orces and the Diamond.
First I would like to make a comparison between Porters 5 forces and his Diamond model. Using the 5 forces model we can see and analyse how the competitive strength of a company / business is. This is a first point of difference between Diamond and 5 forces, as 5 forces focuses on how the company is doing, the Diamond model gives us the competitive strength of nations. Porters Diamond model puts his focus on a nation , that is way they have to think about more things than when compare one business to another. Using the Diamond model gives us the chance to look further into the certain demand conditions , related and supporting industries , how the government is working in that certain nation , how is the rivalry, business??™ structure and strategy. These things are very important to think about when you want to open or work together with foreign nations. It is always good to do a Porters Diamond model first in your home country and then compare it with the other nation. Both Porters Diamond and 5 Forces are based on outside ??“ in thinking and if you want to create more corporate value you also have to think inside ??“ out. With Porters Value Chain framework we can see how a company can create value and competitive advantage => The think from the inside and work it out towards they outside = difference with the outside thinking of Porters Diamond and 5 forces. They start first with analysing the primary activities in the company starting with the inbound logistics going to the operations towards the outbound logistics , marketing and sales and ending with service. Above the primary activities are the supporting activities like the firm??™s infrastructure, the HRM management , the R&D department and the procurement. Before you think outside out you have to be strong as a company and to accomplish that you have to build a strong Value chain framework so you are strong as a company towards his competitors.
Question 2 : Examples on Porters Diamond ???s Factors.
With Porters Diamond model we are able to analyse why some nations/companies are more competitive than others. The most important thing about shaping your company in order to achieve advantages on global scale is to look into the home base of the company. The home base of a company gives them certain factors which can support or hinder them growing on to the global scale. The most important factor to see why a country/organisation is being more competitive , is the Factor Condition. Factors like , capital resources, infrastructure, material resources, education level and human resources are very important the determination of competitiveness. Every country then will optimize their set of most optimal factors. That explains why some countries are more competitive and different. We have for example the Chinese and East ??“ European market also known as low cost countries, because they have a national factor which gives them the competitive advantage to produce low cost because of the low labour costs in their nation.
This advantage gives them strength towards other nations because they have a higher labour cost which make them less profitable if they would produce low cost. Another example is the well-developed capital culture in the United States or the lot of agricultural countries with their fertile soil to grow vegetables or wheat on it which is wanted in a lot of other nations. As we can notice, there are a lot of factor conditions which can make a nation very competitive. Secondly we have the home demand conditions which gives us an overview on how the demand of home country products are. A country can achieve more national advantages by knowing that they are more supplying home based and not to foreign countries. That gives the local organizations a higher competitive advantage to now the specific customer needs. Another example on how a nation/company can achieve more competitive advantage is if there is a big international supporting industry that can lead to another supporting industry. For example if we take the country of Italy then we all know that they are famous for their leather. This leather was not only good for their shoe industry but because of that they could start by getting more competitiveness on the designs, special working machine etc. this gave them a huge advantage and made them stronger than other nations in the world.
Competitive advantage for home country
My home country is Belgium and I think we have a lot competitive advantages. When we look at the factor conditions then I could say that we are very strong evaluated in high-tech and infrastructure. With our ports of Antwerp and Bruges we can welcome a lot of export and maintain the strength to keep competing with other countries. Second of all we are spending a lot of money in our health care system and education. This is one of the factors that gives us a competitive advantages, a lot of skilled labour and education gives us the power to take this with us when expanding to foreign countries. Having Brussels as the capital of Europe has given us the opportunity to work together with a lot of other nations who could see that we are a country to invest in. We have a particular vegetable for which we are known of and that??™s our chicory besides that we have our chocolate which is one of our major competitive advantages , the beer market and the pharmaceutical organizations. Some examples of Belgian companies who used competitive advantage to grow internationally is for example Stella Artois , Neuhaus chocolats and Dexia bank. They have used their competitive advantages to create global market value. With Stella Artois being now AB-Inbev we can show that a small company has grown into a massive organisation with still his headquarters in their home base Belgium.
Can a country influence the competitiveness of the nation ( long term )
I think that on long term a country can influence his competitiveness. When we look for example now at everything that is happening in the world, take Japan for example. Japan is one of the most important technological and financial nations in the world. They had
everything settled down for a good period of time but now with the earthquake and the tsunami, the whole nation is a mess.
There geographical position made a big whole into their knowledge. The people there are busy all day long , work hard and are very smart but these factor conditions can compete witch nature and there position in the world. What happened now will have a huge impact on long term because they will have to start all over again , building cities , ports , industries etc. which will take a lot of time and money from them that they could spend otherwise on the strength in the world competitiveness. It would get worse if the nuclear reactors would explode because then they would not be able to fish again in the sea around the nuclear central or farm around the environment. Which means less income for them and they will have to import more than the can export which is not good because a lot of Japanese product are being exported worldwide that gave them a large competitive advantage. With this example I think that on long term it is always possible to influence competitiveness of a nation because you never know what is coming.
How can a country??™s culture have influence on the competitive situation
In Porters Diamond, Firm strategy , structure and rivalry is also a big factor. These conditions in a nation determine the characteristics of the domestic competition, how organizations are established and how they are managed. The cultural aspect in this case plays a very big role. There is a big difference between nations when it comes to cultural behaviour in organizations. Factors like management structures, working moral and interactions are treated differently in countries. If we take China for example , if you want to do business with China then you must know that they care a lot about respect, so you never give your business card directly ( because then it seems that you want to show you are higher than them), you have to earn a lot of respect before they will start doing business with you. These are small but very important cultural factors which are very important to think of. Another factor to keep in mind is the type of corporate structures that most of the companies in the nation are implementing. In Italy it is know that they are applying the family culture and it??™s also popular in Spain. Other countries are more capitalistic or corrupt and these are things that can have influence on the competitive situation. If I have to say that the country??™s culture of Belgium has an influence on the competitive situation then I would say no if it??™s in a bad way and yes if it??™s in a good way. Because we are raised with high knowledge and are people than can adapt good in different situations is would say that it has given us an positive influence on our competitive situation.