This is the model provided by Michael porter in his book “The Competitive advantage of Nations” where he established answer of some questions that why an industry become competitive in a particular location or place or why a particular nation or a country has competitive edge over others in a particular product or service or industry e.g.
- Why Germans are competitive in concrete or hardware products?
- Why Japan has a competitive edge over others in magnetic train?
- Why Americans are highly competitive in Intellect?
- Why Italians have competitive edge in fashion industry?
The answer is that there are some specific factors if exist in a country or nation can create competitive advantage in a particular industry at global level.
1 Factor conditions
These include physical location, physical resources (raw materials), inherent skilled workforce, basic knowledge, and infrastructure.
These are the basic or favorable factors which will help out the organizations to make them competitive in a particular industry.
2 Demand conditions
Its mean there should be a high demand for that particular product or service in local or home market than foreign market. All the organizations in that particularly industry trying to full fill customers’ needs. Furthermore Customers value improvement in product or service and all organizations trying to satisfy them.
3 Related and supporting industries
There should be related supporting industry in that country i.e. suppliers etc.
If local suppliers will provide parts of the product, it will lead to reduction in cost amount and organizations may be able to produce cost efficient products
4 Firm Strategy, Structure and Rivalry
Each firm should try to develop such a strategy that should be unique so that each firm can get competitive edge over others.
Suitable structure and proper management systems should be implemented.
Rivalry level should be high because it will lead to innovation as all firms or organizations will be trying to get competitive advantage over others.