4.How convincing is Porters model of national competitive advantage in Essay - 1

4.How convincing is Porters model of national competitive advantage in explaining the characteristics and performance of the business systems of major economies - Essay Example This paper will shed some light on how the nations achieve competitive advantage by using Porter’s Diamond model. This model highlights the influencing factors of national competitive advantage. The paper will discuss about the issues and loop holes of the Porter’s diamond Model and how they fail to answer certain circumstantial problems. Porter (1990) explained the competitiveness of a nation based on the four different parameters, which are factor conditions, demand conditions, supporting or related industries and firms’ strategy, structure and rivalry. Factor Conditions: The factor conditions include the production factors of a nation, like human resources and human capital, physical resources, knowledge base, financial strength. The quantity and quality of the available human resources determine the national production capabilities. Physical resources like availability of raw materials, power supply, etc increase the competitive advantage by reducing the operating cost of production. Moreover, the skills and overall knowledge base of the country helps it to involve in innovative product development. Demand Conditions: The demand conditions explain the level of demands of products in the home country. The higher level of demand influences the pace of product innovation and improves service quality. Porter (1990) described that the home demand level is based on three major factors: needs of the customers, growth rate of the customers’ needs and transferring domestic preference in the foreign market. A nation can thus achieve competitive advantage if the domestic demand trend can be predicted by the domestic suppliers faster than the foreign ones. This as a result will allow them to cater to the needs of the domestic customers thereby improving the national economic structure of the country. Firms’ Strategy structure