Analyzing Kuwait's National Competitiveness Using Porter Diamond Model

This essay analyzes Kuwait's national competitiveness using Porter diamond model and recommends strategies for the government to attract foreign investors. The essay identifies limitations and opportunities for Kuwait's competitive advantages and discusses the factors affecting the closure of business entities in the country.

Running head: NATIONAL COMPETITIVENESS
National competitiveness
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Introduction
In the current global business scenario, gaining competitive advantages is not only
important for the business organizations but also for the countries as well. This is due to the
reason that in the current era of globalization, each of the countries is competing with each other
in attracting more foreign investments and developing their economy. In doing so, these
countries are trying to enhance their domestic effectiveness including the infrastructural and
legal aspects to provide the maximum value proposition for the investors (Castro-Gonzales,
Pena-Vinces and Guillen 2016). However, in the recent time, Kuwait is facing issues in terms of
their domestic effectiveness. This is evident in the sign boards of the major restaurants, shops
and industrial premises that reads close, clearance sales and relocated to other countries. These
signs are denoting negative environment in the country.
This essay will critically analyze this phenomenon in Kuwait on the basis of the Porter
diamond model of national advantage. In addition, the recommended steps that should be
initiated by the government in helping the business entities survive in the country will also be
discussed.
Porter diamond model of competitive advantage
Firm strategy, rivalry and structure
According to this model, there are major four elements, which state the four main
determining factors for national competitive advantages of the countries. The first element is
firm strategy, structure and rivalry. This denotes the extent to which the domestic firms are
facing competition, which will further force them to innovate and develop their business process.
In addition, this element also states the extent to which the firms are well organized and

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sustainable in the long term. Thus, in the case of Kuwait, closure signs given the business entities
denote either two situations (Chung 2016). One scenario may be the presence of huge
competition in the market, which caused over saturation. This is leading to the emergence of the
loss for some of the business entities and they are forced to initiate stock clearance sale and
putting the banner “shop closed”. This is due to the reason that in the saturated market, not all the
competitors will be able to earn profits. On the other hand, another scenario may be the absence
of rivalry in the market. This is due to the reason that if the market forces are not favorable and
large enough to support the business entities, then it will be difficult for them to survive. This
may be the case in Kuwait where the business entities are closing their operating due to lack of
market centric forces for their business enhancements (Brosnan, Doyle and O’Connor 2016). In
both the scenario, the attractiveness of Kuwait for the foreign investor will be affected as no one
will enter in the country with saturated condition or lack of market forces.
Factor conditions
This factor denotes the availability of the natural resources in the country and how these
resources are helping the business entities in having effective process of operation. Thus, the
more will be the access to resources, the more will be the competitive advantages of the
countries in attracting new investors (De Feis, Grunewald and De Feis 2016). In the case of
Kuwait, the given scenario denotes that resources are well available in the country. This is due to
the fact that if the resources are not available in the country, then the business entities may not
get incorporated. Having the presence of these numbers of entities in the countries denotes that
there is not lack of resources in the country (Fainshmidt, Smith and Judge 2016). Thus, it can be
concluded that in terms of the factor conditions, Kuwait is having competitive advantages in
terms of the available resources and this will help them to further attract the foreign investors.

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However, on the other hand, it should be noted that even if the resources are well available in the
country, cost involved in utilizing them is more. This is due to the fact that it is stated in the case
that some companies have closed their operation in Kuwait and relocated to other countries. This
denotes either the lack of required resources or the cost involved in it is huge to make the
business operation viable.
Demand conditions
This factor refers to the demand factors in the market and how these demand factors are
motivating the entities in developing their product and business strategy. Thus, the more will be
the demand condition in the country, the more will be the market opportunities for the investors.
The identified issues in Kuwait denote that demand factors are not favorable in the country. This
is due to the fact that due to the lack of demand in the country, shops and business are being
forced to close their operation or clearing their stock in minimal price (Narula and Verbeke
2015). Moreover, due to the lack of demand factors in the country, entities are being forced to
relocate their operations from Kuwait. If the demand factors were positive, then they would have
initiate new and innovative strategies to survive in the market. Thus, it can be concluded that
demand factors are low in Kuwait and this will have negative impact on attracting the foreign
investors.
Related industries
This refers to the availability of the supporting and complementing industries, which will
help the investor in sourcing from the locals. In the case of Kuwait, the given scenario states that
the country is having lack of supporting industries. This is due to the reason that due to the lack
of supporting industries, companies are being forced to leave Kuwait (Gunarathne and Senaratne

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2018). If this case was positive, then they may close their sales operation in Kuwait and but
continue as the export hub, which is not happened in this case. Moreover, it should also be noted
that with the help of the effective and extensive supporting industries, the entities that given the
notice of closure can diversify their business operations or change their strategy. However, due
to the lack of supporting industries in the country, they were forced to relocate their business
operations or closing it.
Recommended strategies
It is recommended that government should first initiate practices and policies in creating
demand in the market. This is due to the reason that the more will be the demand in the market,
the more will be the opportunities for the organizations and thus they will get attracted. Thus, it
is recommended that the government of Kuwait should initiate fiscal policies in increasing the
purchasing power of the customers. This will include increasing the public expenditure in the
forms of infrastructural developments. Increase in the public expenditure will increase in cash
flow in the economy and average customers will have more funds in hand for expenditure. Thus,
the demand will get enhanced in the long term. On the other hand, development in the
infrastructure will also enable Kuwait to provide more facilities to the investors, which will
further help to gain competitive advantages.
It is also recommended that incentives should be offered to the investing firms in the
forms of tax exemptions and tariffs. This will also be beneficial due to the reason that offering
tax exemptions will enable the business entities in Kuwait to have lower cost of operations and
leverages on the tariffs will motivate them to initiate international trade. Thus, the more will be
the exemption of tax, the more will be the attractiveness of Kuwait among the foreign investors

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and their inflow in the country will increase the competitive rivalry in the domestic market.
Furthermore, if government can offer free trade agreements with major economies across the
world along with providing lower tariff rates, then Kuwait can be positioned as a major export
hub. This will also ensure that domestic demand factors will not only the determining factors for
gaining competitive advantages for Kuwait.
Foreign institutional investments should also be encouraged apart from the foreign direct
investments. This is due to the reason that foreign institutional investments will pose more
reliable and easier forms of investment for the foreign investors and this will also increase the
employment opportunities in the country. In majority of the cases, foreign institutional
investments are being done in the service sector and thus Kuwait will have huge employment
opportunities to be gained from it. The more will be the employment opportunities, the more will
be the purchasing power of the average customers, which will in turn increase the demand
factors in the country. The last recommended step for the government of Kuwait is to initiate
market based open economy in the country. This is due to the fact that with the help of the open
economy, business entities will have the opportunities for tapping the foreign market also along
with the domestic market. Hence, they will not only depend on the domestic market factors and
will not be forced to close their business operations based on unfavorable constitutions in the
domestic market.
Conclusion
Thus it can be concluded that Kuwait as a country is having a few limitations as well as
opportunities in terms of their competitive advantages. In this paper, these factors are being

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identified on the basis of Porter diamond model. In addition, a few recommended strategies for
the Kuwaiti government are also being discussed on the basis of the identified limitations.

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