B301 Strategy II: Analyzing Diamond of National Advantage for FDI

This essay evaluates the 'Diamond of National Advantage' framework and its application in attracting and retaining Foreign Direct Investment (FDI). It highlights how a country's competitive market is determined by its capacity for innovation and upgrading across various industries. The paper d...Read More

B203B1
Diamond of national advantage VS FDI
By (Name)
Course
Instructor’s Name
Institutional Affiliation
The City and State
The Date

B203B2
Introduction
The major objective of this paper is to make an evaluation of the "Diamond of national
Advantage" and discuss the country can attract and retain Foreign Direct Investment. In this case,
the flow of foreign direct investments is not only driven by the country capital of the host
country but also, various ways of understanding on how to uses and access markets so as to earn
profits. Further, Foreign Direct investment helps in solving various national problems by;
providing capital used in enhancing economic development and growth (Porter 2011).Further,
Foreign Direct Investment also helps in the transfer of knowledge and technological skills. Also,
Foreign Direct Investment enables the country to gain access to different foreign markets. A
country's competitive market is majorly determined by its capacity of various industries to carry
out upgrade and innovation. To note, most countries have gained their advantages over various
worldwide competitors’ dues to challenge and pressure. Additionally, countries gain from having
genuine domestic rivals, demanding home-based customers and continued local-based suppliers
(Riasi 2015).
For the purpose of this paper, "diamond of National Advantage" will be applied to
discuss various ways of attracting and retaining Foreign Direct Investment (Porter 2011). In this
case, the "Diamond of National advantage" was created by "Professor Michael Peter" with an
aim of explaining why given countries experience wide internationally competitive markets in
various industrial sectors (Porter 2011). The framework involves major 6 national level elements
that focus on the country's competitive advantage. In this case, the most common factors include,

B203B3
supporting industries, firm rivalry, factors supporting and demand. Further, more two factors
include chance and government. To note, most countries have applied the "Diamond of National
Advantage" framework to concentrate on the development of their regional policies in the market
entry and public sector strategies by multinational firm managers (Porter 2011).
The following "Diamond of National Advantage" factors by Porter can be used by the
country to attract and retain Direct Foreign Investments; factor conditions; this involves the
position of the country the production factors that is to say; infrastructure, labor and many other
(Mulder 2016). In this case, such factors of production are important in ensuring competition in
various industries. To note, the factors are arranged according to human resources such as
(commitments, the level of qualification and many others), material resources like (vegetation,
space, and natural resources), financial and capital resources. In this case, the national factors
always provide the country with a major competitive advantage that is subsequently considered.
To note, every country has different factor conditions that it should develop in regards to its
optimal conditions. Therefore the country is required to specialized factors that generate genuine
competitive advantage. To note, specialized elements involve sustained and heavy investment
which are not simple to be duplicated. Therefore, this helps the country to gain a competitive
advantage over others hence attracting foreign investments. Also, the country gains the
competitive advantage because of the uniqueness of its firms (Mulder 2016).
Demand conditions; in this case, if the customers in the country continuously demand the
products in a given economy, more pressure is put on firms so that they can continuously
improve their market competitiveness by using various innovative goods (Mulder 2016). This
factor also involves various questions like, "what reasons are there for a successful market?",
"what is the nature of the market and what the market size is?" To note, the factor involves the

B203B4
various interaction of various transportation cost and "economies of scale" (Mulder 2016).
According to Porter, he illustrates that a given state can be in the position to attain the home
advantage in the market segment or industry in case, its national demand illustrates earlier and
clearer demand trend signals to its domestic suppliers as compared to the foreign competitors. To
note, domestic markets have a greater influence on the country's ability to notice the needs of its
customers as compared to the foreign markets. Therefore, the country can attract and retain
foreign direct investment by focusing on focusing on the internal market and attract more foreign
investors to supply the high demanding domestic customers (Mulder 2016).
Firm structure, strategy, and Rivalry; these elements are concerned about how a given
organization is managed and organized, rivalry measurements and corporative objectives. Also,
it aims at establishing the conditions that a given country depends on to determine where a given
industry has to be established(Pradhan 2009). In this case, cultural norms play a significant task
in this factor. In this case, counties, regions, and provinces always differ depending on
differences in working morale, and interaction of different countries. In summary, the factor
illustrates how a country's companies are managed, formed and managed and also the type of
internal rivalry (Pradhan 2009).
Supporting and relating industries; this involves or does not involve internationally
competitive supporting and supplying industries. In this case, a given a successful international
industry may create a greater impact in the success of another supporting or related industry. To
note, competitive industries always internationalize and reinforce innovation in various
industries at different stages in the country's domestic system (Lean et al 2009). On the other
hand, related industries are of great importance in the market competitive by coordinating
various activities such as hardware and software. In this case, the country can attract Foreign

B203B5
Direct Investments by encouraging related industries that can force international investors to
coordinate with different domestic firms that produce related products such as leather and shoes
(Karimi et al 2009).
Therefore, the country's government is required to put into place the "Diamond of
National Advantage" factors so as to help in the home to develop a stronger international market
hence attracting and retaining Foreign Domestic Investment (Porter 2011).In addition, the
government can implement national advantages by simply focusing on the greater expectations
from the performance of products, environmental or safety standards. In addition, the
government can also encourage vertical coordination between buyers and suppliers on the
domestic and global market (Lean et al 2009).
In this case, most of the governments value the importance of encouraging industries to
innovate and upgrade so as to attain growth in the long run (Mallik2008). This is commonly
evidenced in most countries that have simple options for the growth of the future by producing
improved or new outputs. Therefore, the government is required to directly support industrial
innovation and upgrade by either supporting them funding them to carry out research or
encouraging the private industries to invest in various innovations and research by supporting the
spread and use of technology and also supporting venture capital (Mallik 2008).Therefore, the
government should adopt the following four policies to enhance the capacity of its industries to
innovate and upgrade;
First, carrying out strategic immigration of skilled labor. In this case, the country is
required to give chance different foreigners so as allow industries gain acquire new skills form
various countries (Leipras& Stephan 2010). This allows the industries to reduce their cost for
jobs, dealing recovery of the economy and also harming the worldwide innovation leadership

B203B6
and entrepreneurship. By allowing immigration of foreign labor, the country's industries are in
the position to upgrade their skills. This also helps the country to remove and also widen its
industrial gap worldwide(Audretsch et al 2007).
Second, removing all the unnecessary laws, in this case, the government is supposed to
always set various international standards that industries should follow to measure and test their
Department. Further, the governments are required to advise industries to hire different
consultants so as to acquire new skills in their production and hence upgrade. Also, some
government laws are such ambiguous that industries find it difficult to understand whether that
are not violating the set laws. In addition, most of the government laws threaten the industrial
competition hence denying innovation and upgrade (Czarnitzki&Hottenrott2009).
Third, promoting the country's economic growth, by the government encouraging
economic growth, industries are encouraged to carry out innovation so as to increase their
production capacity and quality of products. IN this case, the government is supposed to
encourage industries to focus on improving their production capacity and quality by carrying out
research in different international countries. By promoting economic growth, industries will be
motivated to carry out innovation and upgrade (Coltman et al 2008).
Fourth, Encourage volunteer by the unemployed workers, by encouraging volunteer of
unemployed workers, they become motivated and learn various industrial activities. According
to research, "the longer the unemployment payments the longer the jobless stay jobless." By
reducing the rate of unemployment, workers gain more contacts, references, and skills that can
best help them attain a good job. In addition, volunteering encourages innovation in industries as
people are exposed to new tasks that they can help industries upgrade (Coltman et al 2008).

B203B7
Conclusion
The country can attain Foreign Direct Investment in case foreign investors establish their
businesses or acquire different assets such as companies in the foreign industry. To note, foreign
direct investment is far different from the portfolio in that way that investors buy equities of
companies in foreign countries. Therefore, the country should focus on the "Diamond Of nation
Advantage" factors to attract and retain Foreign Direct Investment.

B203B8
References
Audretsch, D,B., Dohse, D. 2007. Location: A neglected determinant of firm growth. Review of
World Economics 143 (1): 79-107.
Coltman, T., Devinney, T,M., Midgley, D, F., Venaik, S. 2008. Formative versus reflective
measurement model: Two applications of formative measurement. Journal of Business Research
61: 1250–62.
Czarnitzki, D., Hottenrott, H. 2009. Are local milieus the key to innovation performance? Journal
of Regional Science 49(1): 81-112
Karimi, M.S and Z. Yusop. 2009. FDI and Economic Growth in Malaysia. Munich Personal
RePEc
Lean, H. H., and Tan, B.W. 2010. Linkages between domestic investment, foreign direct
investmentand economic growth in Malaysia. Journal of Economic Cooperation and
Development, 32(4):
Lejpras, A., Stephan, A. 2010. Locational Conditions, Cooperation, and Innovativeness:
Evidence from Research and Company Spin-Offs. The Annals of Regional Science (forthcoming)
Mallik, G. 2008. Foreign aid and economic growth: A cointegration analysis of the six poorest
African countries. Economic Analysis & Policy 38(2): 251-260
Merican, Y. 2009. Foreign Direct Investment and growth in ASEAN-4 nations. International
Journalof Business and Management 4(5): 46-61

B203B9
Mulder, P. 2016. Porter Diamond Model. Retrieved [insert date] from ToolsHero:
https://www.toolshero.com/strategy/porter-diamond-model/
Porter, M. E. 2011. Competitive advantage of nations: creating and sustaining superior
performance. Simon and Schuster.
Pradhan, R.P. 2009. The FDI-led growth hypothesis in ASEAN-5 countries: Evidence
fromcointegrated paned analysis. International Journal of Business and Management 4(12): 153-
164.75-96
Riasi,A. 2015. Competitive advantages of shadow banking industry: An analysis using Porter
diamond model. Business Management and Strategy, 6(2), 15-27.

B203B10