Chapter looks a 2 frameworks, both dealing with CSAs:
1. Single-diamond model (Porter) to analyse international competitiveness of large economies (e.g. U.S.).
Double-diamond framework to analyse smaller, but open trading economies (e.g. Canada, New Zealand, Korea).
2. Economic Integration (CSAs) and National Responsiveness (FSAs) matrix: Managers of MNEs have a network of subsidiaries and national responsiveness is relevant when making decision aboput the strategy and organisational structure of such firms.
Some MNEs rely on their home market, but more and more they are finding that they must focus on the markets where they are doing business in terms of R&D, design and manufacturing.
MNEs can no longer rely exclusively on the competitive advantage they have at home to compete in the global market.
Many small countries realise that they must rely on export strategies to ensure the growth of their economies.
THE SINGLE DIAMOND
4 Factors that can be critical to helping a country build and maintain competitive advantage:
1. Factor conditions: human resources/ labour market, natural resources, knowledge resources, financial resources, infrastructure.
2. Demand conditions: composition of demand in home market, size and growth re=ate of home demand, how domestic demand is internationalised.
3. Related and Supporting Industries: presence of internationally competitive supplier industries, internationally competitive related industries that can coordinate and share activities in the value chain,
4. Firm strategy, structure and rivalry: ways firms are managed and choose to compete, company goals, amount of domestic rivalry.
Two other variables play important roles:
1. The role of chance : Events of chance may shift competitive position through; new inventions, political decisions by foreign governments, wars, shifts in financial markets, surges in world or regional demand, major technological breakthroughs.
2. The role of government: Government can influence all of the four factors though; subsidies, educational policy, regulations, purchasing goods or services, tax laws and antitrust regulations.
The four stages of national development ADVANCE
1. Factor-driven (Singapore) >>>> 2. Investment-driven (Korea) >>>> 3. Innovation-driven (Japan, Sweden, Italy), DECLINE
>>>> 4. Wealth-driven (UK)
THE DOUBLE DIAMOND (see Fig. 10.3, p307) THIS WILL MAKE A LOT MORE SENSE IF YOU LOOK AT THE Figs.
Builds on Porter’s theme of corporate strategy and process as a source of competitive advantage for a nation.
Canada and the Double Diamond
Two main themes in Canadian industrial policy: 1. Export promotion for natural resource industries.
3. Import substitution in the domestic arena.
The Canadian government’s role has been to help leading Canadian-based businesses by establishing relatively low taxes on resource extraction and by subsidising the costs of capital.
“Double-diamond” shows that 2 countries (US and Canada) are integrated for strategy purposes into a single market.
Canadian businesses are in direct competition with US firms.
The Free Trade Agreement has created unique pressures on Canadian subsidiaries of US MNEs.
Major Canadian companies are working to develop competitive positions in the United States as well as worldwide.
Major Canadian firms are viewing the US and Canada as home-based markets and integrating the use of both “diamonds” for developing and implementing strategy. (see Fig 10.4, p308). This requires;
1. Developing innovative new products and services that meet the needs of both US and Canadian customer.
2. Drawing on support industries and infrastructure of both diamonds.
3. Making free and full use of the physical and human resources in both countries.
Strategic clusters in the double diamond
Double diamond forces business and government