Porters Diamond Of Competitive Advantage :: Business Economics

IntroductionSince its publication in 1990, Michael Porters book The Competitive returns of Nations has attracted much consideration. The main analytical tool of the book is the diamond of competitive advantage (figure 1). This mock up is based on four country specific determinants and cardinal external variables. Porters four determinants and two outside forces interact in a diamond of competitive advantage, with the nature of a countrys international competitiveness depending upon the type and prime(prenominal) of these interactions. However, because it is fundamentally a home-based type of international competitiveness, the diamond theory is criticized by many international business scholars. Dunning , and Rugman , point out that the influence on competitiveness of two-way foreign direct investment (FDI) and foreign government influence and interference on trade and investment have been neglected. Rugman and Collinson have also evaluated the model and identified eight are as for comment. This essay will look at Rugman and Collinsons criticisms of Porters model, focussing on three major areas the role of FDI, foreign government influence and Multi field Enterprises (MNEs), before looking at developments to Porters diamond with country specific examples. RUGMANS AND COLLINSONS CRITIQUE OF PORTERS DIAMONDThe eight areas identified for comment and evaluation namely the model is hold in by being based on ten countries, which are either industrialised or a member of a triad the Government is of captious importance, and has been neglected by Porter chance although critical, is difficult to predict or guard against Porters model must be applied in terms of company-specific considerations and non in terms of national advantages Porter delineates only four distinct stages of national competitive development Porter contends that only outward FDI is valuable in creating competitive advantage, and inbound foreign investment is never the solution to a nations competitive problems reliance on natural resources is viewed by Porter as short to create worldwide competitive stature the model does not adequately address the role of MNEs.FOREIGN DIRECT INVESTMENTFDI tends to focus on opportunities in the same continental region. This often reflects attempts by multinationals to build up regional networks starting near their home base. A major conceptual problem with Porters model is due to the narrow definition he applies to FDI. Porter defines only outward FDI as being valuable in creating competitive advantage and that inward FDI is not entirely healthy . He also states that foreign subsidiaries are importers, and that this is a source of comparative disadvantage .