National Competitive Advantage PDF

Running head: COMPETITIVE ADVANTAGE
Competitive Advantage
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1COMPETITIVE ADVANTAGE
The prosperity of a nation is created. Its competitiveness generally base on the
potential of its industries to upgrade and innovate (Ambec et al. 2013). Companies all over
the world gain advantage against the best competitors of the world as of challenge and
pressure. They are benefitted from having aggressive suppliers that are home based, having
rivals that are strong and local customers who are demanding. In this world of growing
competitions, the nations have become more important and its role too has enlarged
simultaneously. Competitive advantage is usually sustained by a localized process that is
extremely high. The differences in the economic structures, national values, histories, culture
and institutions, all contributes to the competitive success of the nation (Stenholm, Acs and
Wuebker 2013). This paper will elaborate on the four different policies with each of the four
determinants of national competitive advantage that will attract Multinational Corporations
(MNCs) and protect domestic firms in your country. Furthermore, it will also shed light on
the discussion of four strategies that can enhance the capacity of firms in your country to
create more employment.
The determinants of the national competitive advantage are- a) Firm Strategy,
Structure and Rivalry b) Demand Conditions c) Related and Supporting Industries and d)
Factor Conditions (Acs et al. 2017). When any national environment supports the fastest
accumulation of the specialized skills and assets, companies in the nation achieve a
competitive advantage Likewise, when any nation supply better ongoing data and information
into the process needs and products, the firms achieve competitive advantage. Similarly,
when a national environment forces the firms in order to invest and innovate, the companies
then gain competitive advantage and at the same time, get the opportunities to upgrade that
advantage gradually.
Firm Strategy, Structure and Rivalry- It refers to the condition in the nations that
governs the way companies are organized, created, are managed along with the nature of

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domestic rivalry (Gmelin and Seuring 2014). For example, in Italy the successful global
competitors are generally the privately owned companies that are small or of medium size
and are operated such as the extended families. In contrary to that, the case in Germany is a
bit different. The company in Germany tends to severely hierarchical in the management
practices as well as in the organization. However, the competitiveness in a particular industry
leads from the convergence of the organizational modes and the management practices that
are favored in the nation and the sources of the industry’s competitive advantage (Weiermair
and Fuchs 2017). In the industries in which the Italian companies are the world leaders like in
that of the footwear, furniture etc., a company strategy which emphasize on focus, rapid
change, customized products, breathtaking flexibility and niche marketing fits to the
management system of the Italy as well as the dynamics of the industry. Furthermore, the
presence of powerful rivals is the final that is a induced to the formation and perseverance of
the competitive advantage. Like in Switzerland, the rivalry among the pharmaceutical
companies like Ciba-Geigy and Hoffmann-La Roche supports to the leading global position.
It is also the same in the United States’ software industries.
Demand Conditions- It refers to the nature of the home-market demand for the
product and service of the industry (Johanson and Mattsson 2015). It might be noticed that
globalization of the competition is slowly diminishing the need of the home demand.
However, it is not the case. It is in fact, the character and composition of home market that
generally has an unbalanced impact on the way companies respond and perceive to the needs
of the buyers. The size of the home demand proves to be far less important than the character
of the home demand. The condition of the home demand builds up competitive advantage
while a specific segment of industry is grater or is much more visible in the local market as
compared to the foreign market (Zhang and London 2013). The companies of a nation gains
competitive advantage if the local buyers are sophisticated and demanding. The sophisticated

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purchasers supply a window within the advanced needs of the customers. They also
pressurize the companies in order to meet the high standards, to upgrade as well as innovate
themselves into the more advanced segments than before. Along with the factor conditions,
the demand conditions offer the advantages through forcing the firms for responding to the
severe challenges.
Related and Supporting Industries- It is either a presence or is an absence of the
industries of the supplier or any other associated industries in the country which are globally
competitive. The globally or internationally competitive home based suppliers provide
advantages in the downstream industries in different ways. Firstly, they provide cost-effective
inputs that are cost effective in an early, efficient and rapid way. Demonstration of the Italian
company “The Italian Footwear Cluster” is a good example of in what ways a group that is
contributing to the industries generates a competitive advantage in a wide array of
interconnected industries which are competitive in the global environment. For example, the
leather manufacturers achieve an early insight of the fashion trends that helps them in
planning new products and services. Such interaction is mutually advantageous and at the
same time, is self-reinforcing as well, but it does not take place automatically, instead it
happens through proximity, but occurs only because of the fact that the companies and the
suppliers work at it.
Factor Conditions- It is the position of the nation in factors of the production such as
skilled labor and infrastructure that are important for completing in a particular industry
(Edwards, Sutton-Grier and Coyle 2013). According to the “standard economic theory”, such
factors determine the trade flow. Nation will export those goods like capital, natural
resources, labor, infrastructure, land etc which make maximum use of the factors along with
which it is comparatively well furnished. The most significant production factors are the ones
which involve heavy and sustained investments as well as are specialized. The basic factors

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like the labor pool and local raw material source do not include an advantage in the industries
that are knowledge intensive nation succeeds in the industries in which it is particularly good
at the factor creation. The competitive advantage is a result of the presence of the best
institutions in the world which first create a specialized factor and then constantly work in
order to upgrade them. For example, In Denmark there are two hospitals which concentrate in
the studies and treatment of diabetes (Ferwana et al. 2013). Similarly, Holland has premier
research institutions in the packaging, cultivation as well as in the shipping of the flowers in
which it is the leader of export in the world.
The four strategies which have the ability to enhance the capacity of the companies in
the nation for creating more employment are- taking integrated approach to the productivity,
skills, and the growth in economy needs strong coordination as well as social dialogue at the
local level through the public employment and business support agencies (Leigh and Blakely
2016). Like, for example in Turkey, the provincial directorates of the Social Security
Institution that are functioning at local level has very strong contact with the employees,
employers, and the rest social partners and this results in more proper analysis of the regional
experiences in combating accessibility. Secondly, the labor mobility in the country will bring
in benefits. It will help in overcoming the mismatches in between the demand and supply of
the skills as well as in reducing the unemployment at national level (Kahanec et al. 2013).
Thirdly, an approach that is much more integrated to the skills could further help the local
economies in making structural adjustments and in attaining the national productivity and
employment objectives (Maigida, Saba and Namkere 2013). In the emerging economies, this
approach could play a very important part in helping out the regions in order to avoid the
issue of “middle-income trap”. This approach will also help in addressing with the informal
employment problem. With the same, there is high need for partnership among the private,
public and the union sectors in order to improve the conditions of working and supporting

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transitions to formality. Trade unions can also play an important part in this context by
ensuring that the domestic companies better tackle the skills and supply a proper working
condition to the employees and the company workers (Thompson, Newsome and Commander
2013). This consists of decreasing the challenges to the job creation for the small or medium
sized entrepreneurs or enterprises. Finally, as stated by Kahanec (2013), “Labor market
policy plays a central role in supporting job creation, through ensuring that businesses can
access people with the right skills to help them to start up and grow.” The policies of building
serviceability and promoting flexibility are conductive to effective matches in between the
opportunities and skills. Along with that, the search for the efficiency while delivering of the
national policies and programs could result in attention lacking towards the negative impacts,
which a “one size fits all” approach might have in specific areas. This could help in
undermining the productivity, slowdown the structural adjustments and at the same time will
increase the employment factors in the country.

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References:
Acs, Z.J., Audretsch, D.B., Lehmann, E.E. and Licht, G., 2017. National systems of
innovation. The Journal of Technology Transfer, 42(5), pp.997-1008.
Ambec, S., Cohen, M.A., Elgie, S. and Lanoie, P., 2013. The Porter hypothesis at 20: can
environmental regulation enhance innovation and competitiveness?. Review of environmental
economics and policy, 7(1), pp.2-22.
Edwards, P.E.T., Sutton-Grier, A.E. and Coyle, G.E., 2013. Investing in nature: Restoring
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Ferwana, M., Firwana, B., Hasan, R., Al‐Mallah, M.H., Kim, S., Montori, V.M. and Murad,
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Leigh, N.G. and Blakely, E.J., 2016. Planning local economic development: Theory and
practice. Sage Publications.

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