Diamond of National Advantage and Policies for Enhancing Capacity of Industries

This article analyzes the strategies adopted by the Kuwaiti government to attract and retain Foreign Direct Investments. It discusses the Diamond of National Advantage theory and policies for enhancing capacity of industries in Kuwait. The article also highlights the factors contributing to the success of organizations in the global markets and the determinants of National Advantage. The policies for enhancing capacity of industries include encouraging innovation and creativity, strategic immigration reform, removing unclear and unnecessary laws, and infrastructure development.

Running Head: Business Level Strategy
Business Level Strategy

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Table of Contents
Diamond of National Advantage....................................................................................................................... 2
Diamond of National Advantage theory.................................................................................................... 2
Policies for enhancing capacity of industries.............................................................................................. 5
References................................................................................................................................................................. 6

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Diamond of National Advantage
Foreign Direct Investments (FDI) is an investment made by the companies in a particular
country with the aim of setting up an effective image in the business industry of a
particular market. Foreign direct investments have become the necessity for the countries
with the effect of globalisation. Revolutionary changes have been recognised in the
industries after the introduction of globalisation. Along with this, internet and
technological revolutions have also become the primary factors for enhancing performance
of business entities. This has originated numerous opportunities for the business entities in
relation with their expansion at domestic as well as at the international level. FDIs act as
crucial term for the growth of the countries as it has become one of the main attributes
especially for developing countries in relation with enhancing their GDP. Thus, it is
necessary for the countries to regularly invest over the infrastructure and other certain
things in order to attract multinational companies to invest in their countries (Konsolas,
2017).
Kuwait has a petroleum-based economy and petroleum is considered as one of the main
export product for Kuwait. Kuwaiti dinar is the highest-valued unit of currency across the
globe. Kuwait is the seventh richest country in the world per capita. Along with this, Kuwait
is the second riches country per capita in GCC after Qatar. Petroleum is considered as the
major source of income for Kuwait and it contributes 50% of the GDP of the country and
90% of the government’s income. Apart from petroleum industries, financial services are
another crucial functionality of Kuwait (Gereffi & Lee, 2016).
Kuwait regularly update their FDI law with the objective to encourage foreign direct
investments and the major reason for continuous encouragement of FDIs is the decline in
the oil revenue as well as the requirement of diversify the economy. In relation to the FDIs,
Kuwaiti government has made amendments in their policies with the objective of retaining
interest of the multinational corporations in terms of investing in their country (Leigh &
Blakely, 2016). In this scenario, strategies adopted by the Kuwaiti government to attracting

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and retaining Foreign Direct Investments will be analysed below with the help of
application of Diamond of National Advantage theory:
Diamond of National Advantage theory
Primary objective of this theory is to highlight the importance of features of the home
country in terms of success of the organizations in the global markets. This theory named
as diamond theory as it is depicted in the shape of diamond framework. This theory
describes the factors which contribute towards the success of the organizations in the
global industries and these factors are known as determinants of National Advantage.
Figure 1: Diamond Theory of National Advantage
 Factors of Production: Primary factors required for executing manufacturing of
goods and services in an appropriate manner are natural resources and labour.
Apart from this, infrastructure has also been included in the list of required factors
for executing production processes to gain positive outcomes. These factors are
infrastructure like communication systems, training and development sessions for
improving employees’ performance. Kuwait has sufficient natural resources, labour
as well as efficient workforce which is capable enough to deal with the latest
business trends (Grant, 1991). This has made Kuwait a well-established country

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with all required resources through which it has acquired success in the global
markets. However, nowadays, things have been changed due to advancement in
technology and introduction of internet and these factors have made countries
advanced along with the absence of basic factors. In the scenario of Kuwait, natural
resources are their primary strength but due to reduction in the revenues from oil
reserves, country’s government has taken several steps with the objective of
attracting multinational companies to invest in the country. Apart from this, Kuwait
has also shifted their interest towards financial services with the objective of
enhancing country’s performance.
 Demand conditions: Demand for the products of organization will be analysed in
the home market with the objective to constantly enhance the performance of the
products. This will originate opportunities for the domestic organizations to
improve the brand image of the product (Dietz, 2018). Thus, if the demand of one
product in the domestic market is high, it will be easy for the organization to market
its products in the international market. In relevance to this, Kuwait is known as the
big exporter of crude oil and with regards to this, country has established its
remarkable position in the global petroleum industry. In this manner, Kuwait
attracts as well as retains foreign direct investments in the country (International
Trade Administration, 2017).
 Related and supporting industries: Kuwait is a large exporter of crude oil and in
relation to this, country has set up its effective brand image in the petroleum
industry. With regards to this, country’s secondary industries mainly include
financial services and information technology industry. Apart from this, it has also
been observed that growth of petroleum industry has positive impact over the
growth of its related industries like financial, transportation, manufacturing, etc.
Although, revenues from oil industry have declined in the past few years and this is
the Kuwaiti government has moved towards the development of other industries
along with taking relevant steps to attract and retain FDIs (Bansal, 2004).
 Organizational strategy, structure and rivalry: Every country is blessed with
some factors like some countries have enough natural resources; some countries

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have enough manpower while some of the countries are blessed with technological
power. These results in competition between the countries and competition led the
countries to invent new strategies and ways to gain competitive edge over each
other. With regards to competing with other countries, Kuwait has moved towards
the development of secondary industries other than petroleum to attract
multinational corporations to invest in the country through which employment
opportunities could be generated for the local people along with retaining its
acquired position in the global market (Porter, 2000).

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Policies for enhancing capacity of industries
Primary aim of any country’s government is to address the issues like economic growth
and unemployment in order to match up with the developed nations across the globe along
with originating opportunities for the industries as well as for the individuals so that they
could expand their businesses in the global market and could be able to earn basic lives
respectively. Following strategies could be adopted by Kuwait government in order to
enhance the capacity of its industries in terms of upgrading their functionalities:
 Encouraging innovation and creativity: This is the best measure irrespective to
the nature of economy or industry. Innovation and creativity helps to generate new
ideas for development and sustainable growth. Kuwait is a Middle Eastern Country
and it is blessed with several natural resources. Country has utilised its available
resources in an appropriate manner and this has made the country stands on the
position of seventh richest country across the globe. In the context towards
enhancing opportunities for its industries, government has planned to encourage
innovative and creative measures. In this manner, government has launched several
schemes under which subsidies will be provided to all those companies who will
come up with a unique idea (Shapiro, 2013). In this manner, industries of Kuwait
will be able to match up with the global standards of industries.
 Strategic Immigration Reform: Due to lot of job opportunities and adequate
economic development, immigrants reach to Kuwait from different parts of the
globe especially from Asian countries to settle down there along with the objective
of earning a healthy and well-being lifestyle. With regards to this, Kuwaiti
government is also investing in other industries, thus, job opportunities for
immigrants will also get increase. In relation to this, talented and skilled immigrants
will be promoted and encouraged so that other than petroleum industry also,
Kuwait could be able to establish appropriate brand image in the global market
(Dodgson, 2018).
 Remove unclear and unnecessary laws: Kuwaiti government has established
several unclear and unnecessary laws due to which industries needs to struggle a lot

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before expanding their business in the global market. Thus, it is being recommended
to the government to remove unnecessary laws along with providing them
appropriate help for expansion of their industries in the global markets (Li & Lin,
2016).
 Infrastructure development: Improving infrastructure or setting up new
infrastructure is the main attribute for every country to boost up FDIs as this is the
main technique for attracting investors from different global parts as well as to
attract the multinational corporations to expand their business in the host country.
Regular development of infrastructure is essential for every country to retain the
interest of the multinational corporations who have already established their
business along with the objective of attracting new companies to invest in their
country (Yakovleva, 2017).

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References
Bansal, D., 2004. Foreign Direct Investment and Performance Requirements: New Evidence
from Selected Countries. Finance India, 18(2), p.998.
Dietz, J.L., 2018. Economic history of Puerto Rico: institutional change and capitalist
development. Princeton University Press.
Dodgson, M., 2018. Technological collaboration in industry: strategy, policy and
internationalization in innovation. Routledge.
Gereffi, G. and Lee, J., 2016. Economic and social upgrading in global value chains and
industrial clusters: Why governance matters. Journal of Business Ethics, 133(1), pp.25-38.
Grant, R.M., 1991. Porter's ‘competitive advantage of nations’: an assessment. Strategic
management journal, 12(7), pp.535-548.
International Trade Administration. 2017. Kuwait - 1-Openness to & Restriction on Foreign
Investment [online]. Available at: https://www.export.gov/article?id=Kuwait-Openness-
to-Foreign-Investment [23/10/2018].
Konsolas, I., 2017. The competitive advantage of Greece: an application of Porter's diamond.
Routledge.
Leigh, N.G. and Blakely, E.J., 2016. Planning local economic development: Theory and
practice. SAGE publications.
Li, K. and Lin, B., 2016. Impact of energy conservation policies on the green productivity in
China’s manufacturing sector: Evidence from a three-stage DEA model. Applied Energy, 168,
pp.351-363.
Porter, M.E., 2000. Location, competition, and economic development: Local clusters in a
global economy. Economic development quarterly, 14(1), pp.15-34.

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Shapiro, G. 2013. Six Ways to Create Economic Growth [online]. Available at:
https://www.forbes.com/sites/garyshapiro/2013/01/23/six-ways-to-create-economic-
growth/#2beb39bb7e32 [23/10/2018].
Yakovleva, N., 2017. Corporate social responsibility in the mining industries. Routledge.