International business - Assignment PDF

Running head: INTERNATIONAL BUSINESS
International business
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Porter diamond model of national advantage
Porter diamond model of national advantage is one of the most popular and widely used
theories for determining the factors in gaining national advantages by the countries. In the recent
time, it is gaining more importance due to the reason that all the major economies around the
world are initiating different initiatives in gaining competitiveness to attract foreign direct
advantages in the country (Contractor 2013). It is also reported that Kuwait is gaining good
amount of global visibility for attracting the multinational organizations for investments.
However, there are still number of gap areas evident if compared to some other major countries
and porter diamond theory of national advantage will be beneficial in determining the ways
about Kuwait will be able to attract and retain foreign direct investments.
According to this theory, there are majorly four factors that should be considered by the
countries in gaining national advantages over others. The first factor is the factors of production.
This defines the availability of the different inputs required for production process. According to
Huggins and Izushi (2015), wide availability of factors of production will help the countries in
reducing the cost of operation for the business organizations and attract new foreign firms. The
authors have also stated that factors of production include both the natural and secondary
resources. Natural resources include the energy sources and other natural minerals that would be
critical for gaining organizational excellence. On the other hand, secondary resources include the
access to technology and human resources in the country. Thus, the effective and proper
coordination among the natural and secondary resources will help the countries in gaining
competitive advantages.

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Kordalska and Olczyk (2016) stated that Kuwait in the recent time is growing rapidly
mainly due to their huge access to the natural resources including oil reserves. They are having
access to huge amount of amount reserves, which is further attracting the oil and gas companies
to invest in the country. In addition, having access to huge oil reserves is also benefitting the
investing oil and gas companies to have lower cost of production. However, on the other hand,
the authors have also stated that Kuwait is lacking behind the other countries in terms of the
secondary resources. This is due to the reason that Kuwait is mainly depended on the skilled
immigrant labors in their oil and gas industries and overall access to latest technology is also at
par to other oil major countries. This is restricting the foreign investors in other business sectors
to invest in the country. Alzayed and Alraggas (2014) stated that Kuwait should focus more on
developing their secondary resources by means of enhancing the skill sets of the employees and
gaining access to latest technologies. This will enable the investing countries in Kuwait to have
the access to skilled human resources and technologies for their competitiveness. The authors
have also stated that proper coordination of the skilled employees and technologies with that of
the available natural resources of Kuwait will help them to gain competiveness and retain the
foreign direct investments.
The second factor of the diamond theory of national advantage is demand conditions,
which denotes market size and forces in the country. This is also important in gaining the foreign
investment due to the reason that the extent of profitability for the foreign companies will be
determined the demand in the home country. According to Solvell (2015), strong demand
conditions in the home country will convince the foreign investors in gaining up their operations
and initiate further development process. In the case of Kuwait, the major challenge that they are
facing is low level of population in the country. Thus, the demand is also on the lower side for

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the foreign investors to invest in the country. The authors have also stated that in order to have
the favorable demand condition in the country, it is important for the government of Kuwait to
increase the purchasing power of the customers, which will further increase the demand in the
market. This will help in attracting new players in the country.
The third factor of the diamond theory of national advantage is the presence of related
and supporting industries. This denotes that if the complementary industries are having favorable
presence in the country, then the foreign industries will get the required support in doing
business in the country. According to Fainshmidt, Smith and Judge (2016), Kuwait is having
favorable supporting industries mainly in the oil and gas sector due to the huge investments
along with the major focus of the government. However, as per the authors, it is important for
Kuwait to develop the supporting domestic industries in other sectors also in order to have
foreign investments in different sectors. In addition, it is also being stated that the more support
foreign players will gain from the domestic industries, the more will be their probability of
further developing in the country.
The last factor of the diamond model of national advantage is organizational strategy and
structure. This denotes that effectiveness of the organizational strategy will determine the
success factor of the foreign investors in country. This factor is mainly a micro factor and is
more depended on the specific organization. However, it is stated by Coeurderoy and Verbeke
(2016) that Kuwaiti government should have the proper and effective regulations for the
operating business organizations, which will guide them to have proper strategic intent in place.
This will further increase the efficiency of the entire business sector of Kuwait and will help in
retaining the foreign business in the country. On the other hand, it is also stated by Farinha,
Ferreira and Nunes (2018) that Kuwait should also have proper mechanism and space for

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generating innovative ideas by the business organizations. This will further help the foreign
investors have more access to the innovative ideas retain their business in Kuwait. Thus, it can be
concluded that these four dimensions of the porter diamond model of national advantage will
help Kuwait to have more attraction and retention of the foreign direct investments.
Recommended government policies
One of the major policies that should be initiated by the Kuwaiti government in
enhancing the innovation and up gradation capability of the industries is opening up the
economy. According to Chu et al. (2015), initiation of the open economy will help the domestic
companies to face the competition from the foreign market entrants. This will act as market force
in continuously developing their products to withstand with the competition. On the other hand,
it is also beings stated by the authors that initiation of the open economy will also enable the
domestic industries to have the access to the foreign technologies, which will further help in
innovation and up gradation. Thus, it is recommended that Kuwaiti government should open up
their economy and enable the domestic industries to have more access to global technological
advancement and competition.
Most of the innovative ideas are being generated from the new startups rather than the
established firms. Thus, it is important for the Kuwaiti government to simple and easy policy for
staring new business in the country. This will enable more new startups to come up and enhance
the rivalry and competition in the domestic industry. The more will be the competition in the
industry, the more will be the pressure on the existing players to innovate in developing new
competitiveness. According to Weiblen and Chesbrough (2015), more engagement with the

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startups will also help in escalating the innovation in the industry and helps in enhancing the
overall competitiveness of the industry.
It is also recommended that government should invest more on developing infrastructure
over consumption. This is due to the reason that industries will further develop and innovate if
they are having the access to better infrastructure at par to the global standard. According to Wu
et al. (2016), development of infrastructure by the Kuwaiti government will help the domestic
industries to have the required competitiveness to compete with the global firms. Thus, it can be
concluded that the fiscal policy of the government will determine the level of innovation and up
gradation for the domestic industries. The government of Kuwait should change their existing
fiscal policy towards more development of infrastructure.
Generation of innovation is related with the access to financial resources and thus it is
important for the government of Kuwait to initiate the policy of simpler process of getting loans
by the small and medium size organizations. According to Chemmanur and Fulghieri (2013),
providing loans will help the domestic business organizations to have the financial capability to
develop and innovate further. In addition, the authors have also stated that if the domestic
industries are having the access to larger financial resources, then they will further invest in
research and development process. Hence, it can be concluded that these major four policies to
be initiated by the government will help the domestic industries to innovate and upgrade in the
long term.

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Reference
Alzayed, A. and Alraggas, B., 2014. The alignment of information technology and business
strategy in the Kuwaiti companies. International Journal of Computer Applications, 101(7).
Chemmanur, T.J. and Fulghieri, P., 2013. Entrepreneurial finance and innovation: An
introduction and agenda for future research. The Review of Financial Studies, 27(1), pp.1-19.
Chu, A.C., Cozzi, G., Lai, C.C. and Liao, C.H., 2015. Inflation, R&D and growth in an open
economy. Journal of International Economics, 96(2), pp.360-374.
Coeurderoy, R. and Verbeke, A., 2016. The unbalanced geography of the world's largest MNEs:
institutional quality and head office distribution across countries. Global Strategy Journal, 6(2),
pp.127-148.
Fainshmidt, S., Smith, A. and Judge, W.Q., 2016. National Competitiveness and Porter's
Diamond Model: The Role of MNE Penetration and Governance Quality. Global Strategy
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Farinha, L., Ferreira, J.J. and Nunes, S., 2018. Linking innovation and entrepreneurship to
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Huggins, R. and Izushi, H., 2015. The Competitive Advantage of Nations: origins and
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J. Contractor, F., 2013. “Punching above their weight” The sources of competitive advantage for
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Kordalska, A. and Olczyk, M., 2016. Global Competitiveness and Economic Growth: A One-
Way or Two-Way Relationship?. Equilibrium. Equilibrium. Quarterly Journal of Economics and
Economic Policy, 11(1), pp.121-142.
Sölvell, Ö., 2015. The Competitive Advantage of Nations 25 years–opening up new perspectives
on competitiveness. Competitiveness Review, 25(5), pp.471-481.
Weiblen, T. and Chesbrough, H.W., 2015. Engaging with startups to enhance corporate
innovation. California Management Review, 57(2), pp.66-90.
Wu, J., Wang, C., Hong, J., Piperopoulos, P. and Zhuo, S., 2016. Internationalization and
innovation performance of emerging market enterprises: The role of host-country institutional
development. Journal of World Business, 51(2), pp.251-263.