Competitive Advantage of Nations
Michael E. Porter
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Now beyond its eleventh printing and translated into twelve languages, Michael Porter’s The Competitive Advantage of Nations has changed completely our conception of how prosperity is created and sustained in the modern global economy. Porter’s groundbreaking study of international competitiveness has shaped national policy in countries around the world. It has also transformed thinking and action in states, cities, companies, and even entire regions such as Central America.
Based on research in ten leading trading nations, The Competitive Advantage of Nations offers the first theory of competitiveness based on the causes of the productivity with which companies compete. Porter shows how traditional comparative advantages such as natural resources and pools of labor have been superseded as sources of prosperity, and how broad macroeconomic accounts of competitiveness are insufficient. The book introduces Porter’s “diamond,” a whole new way to understand the competitive position of a nation (or other locations) in global competition that is now an integral part of international business thinking. Porter's concept of “clusters,” or groups of interconnected firms, suppliers, related industries, and institutions that arise in particular locations, has become a new way for companies and governments to think about economies, assess the competitive advantage of locations, and set public policy.
Even before publication of the book, Porter’s theory had guided national reassessments in New Zealand and elsewhere. His ideas and personal involvement have shaped strategy in countries as diverse as the Netherlands, Portugal, Taiwan, Costa Rica, and India, and regions such as Massachusetts, California, and the Basque country. Hundreds of cluster initiatives have flourished throughout the world. In an era of intensifying global competition, this pathbreaking book on the new wealth of nations has become the standard by which all future work must be measured.
component insertion process in electronic assembly. Matsushita installed the first Panasert machines in its own factories. In 1975, Matsushita founded a separate precision machinery division to further develop its manufacturing equipment expertise. The firm began to sell polar coordinate robots for welding in 1980 and assembly robots in 1982. Yaskawa Electric Manufacturing Company was an example of an entrant during the second half of the 1970s. Yaskawa produced computer numerical controls (CNC)
mid-1970s. Productivity growth is moderate and per capita income growth relatively slow. Figure 7–9, which summarizes the competitive Swedish industries gaining and losing 15 percent or more market share, shows that Sweden has been losing share more often than gaining it. More significant are the specific industries in which gains and losses have occurred, which confirm a mixed record in upgrading. Sweden has, by and large, held its own in the clusters where it has traditionally been strong,
disadvantages: Selective disadvantages in less advanced factors furnish the impetus to increase productivity as well as to upgrade competitive advantages to higher-order types, provided there is appropriate motivation and vigorous domestic rivalry. • Capacity for new business formation: Moving to a more advanced stage requires that there be effective mechanisms in place to create new businesses either through start-ups or internally by established firms. New business formation is essential to
customers will prove important to explaining the nation’s competitive position in an industry. FIGURE 2–4 The Value System The value chain provides a tool for understanding the sources of cost advantage.10 A firm’s cost position is its collective cost of performing all the required activities relative to competitors, and cost advantage can occur in any activity. Many managers view cost too narrowly and concentrate on manufacturing. Successful cost leaders, however, are often also low-cost
Organization for Economic Cooperation and Development, “Competition and Trade Policies: Their Interaction,” 1984. ———, “Main Science Technology and Indicators,” 1988. ———, “Main Science Technology and Indicators,” 1989. OS Publications. All About M&A, Tokyo, 1989. O’SULLIVAN, PATRICK. Geographical Economics. London: Macmillan, 1981. OUCHI, WILLIAM G. Theory Z: How American Business Can Meet the Japanese Challenge. Reading, Mass.: Addison-Wesley, 1981. OUCHI, WILLIAM G., AND