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Four Factors Described by Porter.docx

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Administrative Studies
ADMS 3930

4 factors described in Porter’s diamond of national advantage? How do the 4 factors explain why some industries in a given country are more successful than others? - Porter’s “diamond of national advantage”—the following attributes together determine the playing field that each nation establishes and operates for its industries: • Factor Endowments: the nation’s position in factors of production, such as skilled labour or infrastructure, necessary to compete in a given industry  Companies in advanced nations seeing competitive advantage over firms in other nations create many of the factors of production, as they may require a skilled human resource pool  Must be industry and firm specific  The pool of resources a firm or country has at its disposal is less important than the speed and efficiency with which some of these resources are deployed—firm-specific knowledge and skills created within a country (that are rare, valuable, difficult to imitate, and rapidly and efficiently deployed), are the factors of production that lead to a nation’s competitive advantage • Demand Conditions: the nature of home-market demand for the industries product or service  Consumer pressure presents challenges to a country’s industries, forcing improvements in existing goods and services, and creating conditions for competitive advantage • Helps a nation’s industries better anticipate future global demand conditions and proactively respond to product and service requirements before competing nations • Related and Supporting Industries: the presence or absence in the nation of supplier industries and other related industries that are internationally competitive  Enable firms to manage inputs more effectively  Close working relationships with suppliers  Joint efforts  Related industries create the probability that new entrants will appear on the market, increasing competition and forcing existing firms to become more competitive, giving them a source of competitive advantage • Firm Strategy, Structure, and Rivalry: the conditions in the nation governing how companies are created, organized, and managed as well as the nature of domestic rivalry  Rivalry is intense in nations with strong consumer demand, strong supplier bases, and high new entrant potential from related industries  forces firms to increase efficiency and thus, domestic rivalry forces firms to find new source
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