QUESTIONS

Questions



Questions

Question 1

Increasingly, corporate strategies have to be seen in a global context. Even if an organization does not plan to import or to export directly, management has to look at an international business environment, in which actions of competitors, buyers, sellers, new entrants of providers of substitutes may influence the domestic market. Information technology is reinforcing this trend.

Michael Porter introduced a model that allows analyzing why some nations are more competitive than others are, and why some industries within nations are more competitive than others are, in his book The Competitive Advantage of Nations. This home base provides basic factors, which support or hinder organizations from building advantages in global competition. Porter distinguishes four determinants:

Factor Conditions

The situation in a country regarding production factors, like skilled labor, infrastructure, etc., which are relevant for competition in particular industries. These factors can be grouped into human resources (qualification level, cost of labor, commitment etc.), material resources (natural resources, vegetation, space etc.), knowledge resources, capital resources, and infrastructure. They also include factors like quality of research on universities, deregulation of labor markets, or liquidity of national stock markets.

Porter points out that these factors are not necessarily nature-made or inherited. They may develop and change. Political initiatives, technological progress or socio-cultural changes, for instance, may shape national factor conditions. A good example is the discussion on the ethics of genetic engineering and cloning that will influence knowledge capital in this field in India.

Home Demand Conditions

This Describes the state of home demand for products and services produced in a country. Home demand conditions influence the shaping of particular factor conditions. They have impact on the pace and direction of innovation and product development.

Related and Supporting Industries

One internationally successful industry may lead to advantages in other related or supporting industries. Competitive supplying industries will reinforce innovation and internationalization in industries at later stages in the value system. Besides suppliers, related industries are of importance (IMF, 2007). These are industries that can use and coordinate particular activities in the value chain together, or that are concerned with complementary products in India (e.g. hardware and software). A typical example is the shoe and leather industry in India. India is not only successful with shoes and leather, but with related products and services such as leather working machinery, design, etc.

Firm Strategy, Structure, and Rivalry

The conditions in a country that determine how companies are established, are organized and are managed, and that determine the characteristics of domestic competition

Here, cultural aspects play an important role. In different nations, factors like management structures, working morale, or interactions between companies are shaped differently. This will provide advantages and disadvantages for particular industries.

Question Two

Another lesson from the EU is the importance given to the choice of tools for implementing economic and social policies, while the structural intraregional differences between EU peoples and states have been revealed as not that important: even though there is very little in common between a Finn and a Sicilian (each with ...