National Competitive Advantage: Factors and Strategies

National Competitive Advantage

This is a national perspective!

Factor Endowments

The nation’s position in factors of production, such as skilled labor or infrastructure, necessary to compete in a given industry. Must be industry and firm specific. Firm-specific knowledge and skills that are rare, valuable, difficult to imitate, and rapidly and efficiently deployed ultimately lead to a nation’s competitive advantage. Examples: Japan's JIT inventory management, low-cost and sufficiently high-quality software development in India.

Demand Conditions

Home countries with demanding consumers drive firms to meet high standards, upgrade existing products and services, and drive for further innovation. The home countries’ consumers influence, push, and support. Consider Chinese or Indian car companies trying to enter the US or China. Related to Consumers

Related and Supporting Industries

Availability of supply services, support, technology that are valuable to firms’ supply chains. Additionally, firms in related industries offer the ability to partner, share, etc.

Domestic Rivalry

Domestic rivalry provides a strong force for firms to innovate and find new sources of competitive advantage. Nations with firms with this experience are more likely to have more national and firm experience in developing competitive strategies and effective organizational structures. Related to Competitors

International Strategies

Increase market size, take advantage of arbitrage, enhance a product's growth potential, optimize location of value chain activities (performance, cost reduction, risk reduction), learning opportunities, explore reverse innovation.

• International strategy: adaptation and low costs pressure is low. Diffusion of parenting firm to foreign.
• Global: high low costs pressure, low adaptation. Corporate governance.
• Multi domestic: adapt to foreign markets. low pressure to low costs.
• Transnational: trade-offs of efficiency, local adaptation and learning. High pressures of both low costs and adaptation.

Exporting, licensing, franchising, strategic alliance, joint ventures, wholly owned subsidiaries.