Summary of “The competitive advantage of nations” by Porter, M

The diamond shows the four keys that influence the competitiveness of nations.
Depending on how well a company performs domestically and the nature of the home markets can determine how it performs globally.
Factor Conditions – A nations position in factors of production, skills, infrastructure, resources, capital and land. Having an advantage in these areas adds to the overall competitive advantage. However, where have no advantage, Japan lacks natural resources, and then companies’ ability to innovate and upgrade technology to overcome this disadvantage is key in the overall competitive advantage.
Demand Conditions – If there is a highly competitive home market of discerning consumers creating a high domestic demand for quality, innovative and advanced products then for the company to survive it must become the best locally. If able to compete in an aggressive local market then the company is likely to compete equally as well in the global market.
Related and Supporting Industries – The suppliers of a company should also be a globally competitive supplier so that get best from them, same diamond conditions should apply to supplier. Then company will get best prices and best quality so the related industries become equally valuable to the nation as the companies the supply. Spin off products / companies will arise out of a successful support industry furthering the global competitiveness of the nation.
Firm Strategy, Structure and Rivalry – The firms’ strategy and structure must fit into the local environment and fit the company, so that company will grow. Again, skills and the motivation to apply those skills are important in the growth. Another point reiterated here is rivalry among local firms as this stimulates the growth of an industry in that region.
Governments’ role – This is to push or encourage firms, to raise them and for them to move to higher levels of competitive performance. In democratic countries where a party will only have power for a short term, then policies tend to be short-term – to win popularity and stay in power. The policies that would make a difference usually take to long for a politician to want to implement. The policies that government should implement are to support national competitiveness: encourage change, promote domestic competition and stimulate rivalry. The other key role government needs to enforce is strict product safety and environmental standards, if firms have to comply in domestic market to stringent standards then in the global market will have an advantage.
Company agendas
The leadership of company needs to encourage and seek out challenges and pressures to make the company continuously innovate and upgrade so that their level of competitiveness increases, make the suppliers firm deals with supply at a high standard of quality so further promotes growth in those markets. By growth, they create jobs boosting other areas of the economy.