2. Does Porter Fail to Explain How the Factor and Demand Conditions That Mould a Nation’s Corporate Strategies, Business Structures, and Industrial Clusters Are Established? What Other Theories and Evidence Might Assist Such an Explanation?
2. Does Porter fail to explain how the factor and demand conditions that mould a nation’s corporate strategies, business structures, and industrial clusters are established? What other theories and evidence might assist such an explanation?
Porter explains what factor and demand conditions are, but he fails to explain how they are established. He defines then, and explains them in detail, but lack the most important aspect, which is how they are established. A theory like this is not of much use without the information about the way one can gain these advantages. Porter is always greatly praised for his great work in the management field and he does deserve some of this praise, but if he doesn’t manage to explain himself fully then maybe he is not as great as many people think. I will be going through Porter’s theory of national competitiveness and the diamond as well as the theory of national clusters. I will also then look at criticisms of Porter including Reich’s global webs and Dicken’s general criticism. To be able to determine if Porter fails to explain how factors and demand conditions that mould a nation’s corporate strategies, business structures, and industrial clusters are established one first must understand his general theories on national competitiveness which tie in with his diamond. The determinants of national competitiveness and the 4 corners of the diamond are factor conditions, demand conditions, related and supporting industries, and firm strategy, structure, and rivalry. Factor conditions are “the nation’s position in factors of production, such as skilled labour or infrastructure, necessary to compete in a given industry.” (Porter, 1990) Demand conditions are the demand for the certain product or service in the home market. Related and supporting industries relates to the amount of supplier industries within the nation as well as other similar industries that are competitive on the international scale. Finally, Firm strategy,
Porter explains what factor and demand conditions are, but he fails to explain how they are established. He defines then, and explains them in detail, but lack the most important aspect, which is how they are established. A theory like this is not of much use without the information about the way one can gain these advantages. Porter is always greatly praised for his great work in the management field and he does deserve some of this praise, but if he doesn’t manage to explain himself fully then maybe he is not as great as many people think. I will be going through Porter’s theory of national competitiveness and the diamond as well as the theory of national clusters. I will also then look at criticisms of Porter including Reich’s global webs and Dicken’s general criticism. To be able to determine if Porter fails to explain how factors and demand conditions that mould a nation’s corporate strategies, business structures, and industrial clusters are established one first must understand his general theories on national competitiveness which tie in with his diamond. The determinants of national competitiveness and the 4 corners of the diamond are factor conditions, demand conditions, related and supporting industries, and firm strategy, structure, and rivalry. Factor conditions are “the nation’s position in factors of production, such as skilled labour or infrastructure, necessary to compete in a given industry.” (Porter, 1990) Demand conditions are the demand for the certain product or service in the home market. Related and supporting industries relates to the amount of supplier industries within the nation as well as other similar industries that are competitive on the international scale. Finally, Firm strategy,
References: Dicken, P, (2003) Global shift : reshaping the global economic map in the 21st century. London: Sage. Lazonick, W, (1993) Industry Clusters versus Global Webs. Industrial and Corporate Change Oxford: Oxford University Press. Porter, M, (1990) The Competitive Advantage of Nations. London: Palgrave Macmillan. Porter, M, (1979) On Competition. Boston: Harvard Businesss School Publishing. Reich, R, (1991) The Work of Nations: Preparing Ourselves for 21-Century Capitalism. New York : Vintage Books.