Using Diamond of National Advantage to Attract Foreign Direct Investment

Business Strategy Assignment

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By student name
Professor
University
Date: 25 April 2018.
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In the given assignment, several ways have been touched upon as to how to attract the foreign direct
investment being a policy and strategy expert of the country and how the theory of Diamond of National
Advantage helps in achieving the same (Arnott, et al., 2017). Secondly, few of the ways in which the
government can help in enhancing the capacities of the industries has also been highlighted. For an
economy to progress, both the above points are critical for the progress and growth of the economy.
Question: Assuming you are strategy and policy expert for your country, you are required to apply
Diamond of National Advantage and critically discuss how your country can attract and retain Foreign
Direct Investments (FDI).
In the recent past the role of the nation has grown and the concept of competition in the market has
made things very fast in the modern world. Every nation wants to attract and retain foreign direct
investment so as to fuel the growth of the country and aid the traditional industries. Michael Porter
devised the theory of Diamond of National Advantage, which states that the success of the business in
the international market depends largely on the distinguishing features of the home economy. It has
been named diamond theory since it is in the shape of the diamond (Alexander, 2016). There are some
determinants which lead to the success of organizations and thereby these are called determinants of
national advantage.
Source: http://www.economicsdiscussion.net/
The determinants have been described in detail. The first one is Factors of Production. Some of the very
critical and significant factors of production of goods and services include labour, raw material, natural
resources, infrastructure and communication system. If all these factors are optimally available then the
business is ought to be successful in the global market. For example Korea which is deficient in natural
resources has world class technologies and infrastructures giving it a comparative national advantage
(Bromwich & Scapens, 2016). The 2nd factor is Demand Conditions. In case the demand for the product is
good in the local or domestic market, the producers will be induced to provide the quality material to
counter the competitive pressure and that paves the way for international demand as well (Oberoi,
2018). The 3rd determinants here is Related and Supporting Industries. There are always a few industries
in a country that are considered to be leaders in the world market and through innovation, they are able
to reduce the overall costs. The growth of one industry triggers the growth of another one as well. Like if
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