國(guó)際商務(wù)英語(yǔ)課件

InternationalBusinessLecture1

GlobalizationTeachingArrangementTuesday,3April,AMLecture1:GlobalisationGlobalizationorregionalizationLecture2:DifferencesinCultureReligionand/orethicalsystemWednesday,4April,PMLecture3:InternationalTradeTheoryPoorestcountryandtradeChina=workshopfor(of)theworldLecture4:PoliticalEconomyofInternationalTradeChinaasanon-marketeconomyTeachingArrangementLecture5:ForeignDirectInvestmentDomesticmarketdistortionsandinwardFDILecture6:ForeignExchangeMarketrenminbiRevaluationSaturday,7April,AMLecture7:StrategyofInternationalBusinessBusinessexpansioninEasternEurope.Lecture8:EntryStrategyandStrategicAlliancesMultinationalenterprises’entrystrategyintoChina.LectureOverviewWhatisglobalization?DriversofglobalizationChangingdemographicsoftheglobaleconomyGlobalizationdebateWhatisGlobalization?Czinkotaetal.:Awareness,understanding,andresponsetoglobaldevelopmentsandlinkagesMoretraditionaldefinition:TheshifttowardamoreintegratedandinterdependentworldeconomyTwocomponents:TheglobalizationofmarketsTheglobalizationofproductionGlobalizationofMarketsThemergingofdistinctlyseparatenationalmarketsintoaglobalmarketplaceFallingbarrierstocross-bordertradehavemadeiteasiertosellinternationallyTastesandpreferencesconvergeontoaglobalnormFirmsofferstandardizedproductsworldwidecreatingaworldmarketCitygroup,Coca-Cola,SonyPlaystationvideogames,McDonalds’hamburgers..GlobalizationofMarketsDifficultiesthatarisefromtheglobalizationofmarketsSignificantdifferencesstillexistamongnationalmarketsCountry-specificmarketingstrategiesVariedproductmix

GlobalizationofMarketsThemostglobalmarketsarenotconsumermarketsThemostglobalmarketsareforindustrialgoodsandmaterialsthatserveauniversalneedtheworldoverOil,wheat,microprocessors,commercialjetaircraftGlobalizationofProductionReferstosourcingofgoodsandservicesfromlocationsaroundtheworldtotakeadvantageofDifferencesincostorqualityofthefactorsofproductionLaborLandCapitalBoeing787,65%oftotalvalueoftheaircrafttobeoutsourcedtoforeigncompanies,35%ofwhichwillgotothreeJapanesecompanies.GlobalizationofProductionHistoricallythishasbeenprimarilyconfinedtomanufacturingenterprisesIncreasinglycompaniesaretakingadvantageofmoderncommunicationstechnology,andparticularlytheInternet,tooutsourceserviceactivitiestolow-costproducersinothernationsCallcenters

GlobalizationofProductionOutsourcingofproductiveactivitiestodifferentsuppliersresultsinthecreationofproductsthatareglobalinnatureImpedimentstotheglobalizationofproductionincludeFormalandinformalbarrierstotradeBarrierstoforeigndirectinvestmentTransportationcostsIssuesassociatedwitheconomicriskIssuesassociatedwithpoliticalrisk

TheEmergenceofGlobalInstitutionsGlobalizationhascreatedtheneedforinstitutionstohelpmanage,regulateandpolicetheglobalmarketplaceGATTWTOIMFWorldBankUnitedNations

DriversofGlobalizationTwomacrofactorsseemtounderliethetrendtowardgreaterglobalizationDeclineinbarrierstothefreeflowofgoods,services,andcapitalthathasoccurredsincetheendofWorldWarIITechnologicalchange

DecliningTradeandInvestmentBarriersDuringthe1920sand‘30s,manyofthenation-statesoftheworlderectedformidablebarrierstointernationaltradeandforeigndirectinvestment.AdvancedindustrialnationsoftheWestcommittedthemselvesafterWorldWarIItoremovingbarrierstothefreeflowofgoods,services,andcapitalbetweennations.AverageTariffRatesonManufacturedProducts1913195019902002France21%18%5.9%4.0%Germany20%26%5.9%4.0%Italy18%25%5.9%4.0%Japan30%--5.3%3.8%Holland5%1%5.9%4.0%Sweden20%9%4.4%4.0%GreatBritain--%5.9%4.0%UnitedStates44%14%4.8%4.0%GrowthTrendsEffectsofLoweringTradeBarriersTheRoleofTechnologyLoweringoftradebarriersmadeglobalizationpossible;technologyhasmadeitarealitySincetheendofWorldWarIItheworldhasseenadvancesinCommunicationInformationprocessingTransportationtechnologyInternetUsageGrowthTheChangingDemographicsoftheGlobalEconomyWorldoutputandtradeChangingforeigndirectinvestmentChangingnatureofmultinationalsWorldOutputandTradeCountryShareofWorldOutput1963ShareofWorldOutput2004ShareofWorldExports2004UnitedStates40.3%20.9%10.4%Germany9.7%4.3%9.5%France6.3%3.1%4.8%Italy3.4%2.9%3.8%UnitedKingdom6.5%3.1%4.7%Canada3.0%3.5%3.4%Japan5.5%6.9%5.7%ChinaNA13.2%5.9%

ChangingForeignDirectInvestment

ChangingNatureofMultinationalsNon-U.S.MultinationalsInthe1960’sglobalbusinessactivitywasdominatedbylargeU.S.multinationalcorporationsIn197348.5%ofmultinationalswereU.S.firmsIn200228%oflargestmultinationalswereU.S.firmsGlobalizationoftheworldeconomyhasresultedinarelativedeclineinthedominanceofU.S.firmsintheglobalmarketplace

RiseofMini-MultinationalsGrowthofmedium-sizeandsmallmultinationalshasbecomeatrendininternationalbusinessConsiderLubricatingSystemsInc.whichemploys25peopleandgeneratessalesof$6.5million,ofwhich$2millionarefromglobalsalesInternationalbusinessisconductednotjustbylargefirmsbutalsobymedium-sizeandsmallenterprisesTheGlobalizationDebateProFactorsLowerpricesforgoodsandservicesEconomicgrowthstimulationIncreaseinconsumerincomeCreatesjobsCountriesspecializeinproductionofgoodsandservicesthatareproducedmostefficientlyConFactorsDestroysmanufacturingjobsinwealthy,advancedcountriesWageratesofunskilledworkersinadvancedcountriesdeclinesCompaniesmovetocountrieswithfewerlaborandenvironmentregulationsLossofsovereignty

ManagingintheGlobalMarketplaceTherearechallengesofmanaginganinternationalbusiness(anyfirmthatengagesininternationaltradeorinvestment)Managinganinternationalbusinessisdifferentfrommanagingapurelydomesticbusinessinfourareas:CountriesaredifferentRangeofproblemsconfrontedbyamanagerinaninternationalbusinessiswiderandtheproblemsthemselvesaremorecomplexthanthoseconfrontedbyamanagerinadomesticbusinessAninternationalbusinessmustfindwaystoworkwithinthelimitsimposedbygovernmentinterventionintheinternationaltradeandinvestmentsystemInternationaltransactionsinvolveconvertingmoneyintodifferentcurrenciesGlobalisationDebateSource:Bird&Stevens(2003)“Towardanemergentglobalcultureandtheeffectsofglobalizationonobsolescingnationalcultures”,JournalofInternationalManagement,9,395–407TheemergenceofglobalcultureOneworld,onelanguageOneworld,onethirstOneworld,onefoodOneworld,onecarOneworld,oneworldviewGlobalisationDebateBird&Stevens(2003)Thoughdiversitystillabounds,theworldisclearlybecomingmoreunifiedandhomogeneous.Peoplearesharingmoreincommonacrossthespectrumoftheirdailyexperiencesregardingwhattheyspeak,drink,eat,drive,watchforentertainmentandlistentofornews.Thepervasivenessandstrengthofthiscommonalityofexperiencearoundtheglobeiskeytounderstandingtheemergingglobalculturebecausecultureislearnedandacquiredthroughsharedexperiences.GlobalisationDebateSource:Rugman(2003)“Regionalstrategyandthedemiseofglobalization”,JournalofInternationalManagement,9,409–417.Theevidenceisinanditshowsthatglobalizationisamyth.Atanaggregatelevel,Theintraregionaltradeofeachofthe‘‘triad’’regionsofEurope,NorthAmerica,andAsiaisthemajorityoftradeforeachoftheseeconomicblocks.For2000,intraregionalexportswere62%fortheEuropeanUnion(EU),56%forNAFTA,and56%forAsia.Furthermore,thereisagrowingtrendtowardsregionalismoverthelast25years.GlobalisationDebateRugman(2003):Perhapsevenmoreinterestingisthatthelackofglobalizationcannowbeshownatfirmlevel.Acrosstheworld’s500largestcompanies,astartling72%ofallsalesarewithintheirhomeregion.Representativesofastunninglackofglobalsalesactivityareasfollows:GlobalisationDebateGlobalisationDebateRugman(2003):Acrossthe500,forthe380firmsforwhichgeographicsalesdataareavailable,itisonlypossibletoclassify9firmsastruly‘‘global.’’Incontrast,320ofthe380firmsarehomeregionbound,andthese320firmshaveanaverageof80%oftheirsalesintheirhomeregion.GlobalisationDebateGlobalisationDebateRugman(2003):FDIismainlyundertakenbetweentheEUandNAFTAorisintraregionalwithineachregionofthetriad.Theeconomicpictureisoneofincreasingregionalization,not‘‘globalization’’.Implication-weneedtoexamineregionalstrategiesofmultinationalenterprisesasglobalizationdoesnotexist.GlobalisationDebateRegionalismisthedominanteconomicforce.Asadirectcorollarytothistrend,thereisevenlesstradebetweenthetriadblocks.Theblocksareclosingandbecomingmoreinwardlookingandlessglobal.ThiseconomicrealityshouldnowbereflectedinanalysisofMNEstrategy.InternationalBusinessLecture2DifferencesinCulture

LectureOverviewWhatisculture?SocialStructureReligiousandEthicalSystemsLanguageEducationCultureandtheWorkplaceCulturalChange

Guanxi-strengthofrelationshipU.S.BusinesstransactionsareconductedwithintheframeworkofcontractlawandmechanismsfordisputeresolutionareinplaceReciprocalnetworksarebecomingmoreimportantbuthavetooperatewithintheconfinesofthelawGiftsmaybefrowneduponasbribery(ForeignCorruptPracticesAct)ChinaPersonalpowerandrelationshipsorconnectionsratherthanruleoflawareimportantinChinaReciprocalrelationshipnetworkscanoftenmeandoingfavorsorofferingbribesEstablishrelationshipswithgiftsWhatisCulture?WhatisCulture?“Cultureisthatcomplexwholewhichincludesknowledge,belief,art,morals,law,custom,andothercapabilitiesacquiredbymanasamemberofsociety.”-EdwardTylorWhatisCulture?“Asystemofvaluesandnormsthataresharedamongagroupofpeopleandthatwhentakentogetherconstituteadesignforliving.”-Hofstede,Namenwirth,andWeberComponentsofCultureValuesNormsSociety

FolkwaysandMoresFolkways:Routineconventionsofeverydaylife.LittlemoralsignificanceGenerally,socialconventionssuchasdresscodes,socialmanners,andneighborlybehaviorMores:NormscentraltothefunctioningofsocietyanditssociallifeGreatersignificancethanfolkwaysViolationcanbringseriousretributionTheft,adultery,incestandcannibalism

Culture,Society,andtheNationStateAsocietyisagroupofpeopleboundtogetherbyacommoncultureThereisnotastrictone-to-onecorrespondencebetweenasocietyandanationstateNationState:IsapoliticalcreationMaycontainasinglecultureorseveralculturesTheDeterminantsofCulture

SocialStructureSocialstructurereferstoitsbasicsocialorganizationTwodimensionsthatareparticularlyimportantinclude:TheextenttowhichsocietyisgrouporindividuallyorientedDegreeofstratificationintocastesorclasses

ReligiousandEthicalSystemsReligion:asystemofsharedbeliefsandritualsthatareconcernedwiththerealmofthesacredEthicalsystems:asetofmoralprinciples,orvalues,thatareusedtoguideandshapebehaviorMostoftheworld’sethicalsystemsaretheproductofreligionsAmongthethousandsofreligionsintheworldtoday,fourdominateintermsofnumbersofadherents:Christianitywith1.7billionadherentsIslamwith1billionadherentsHinduismwith750millionadherentsBuddhismwith350millionadherentsReligiousandEthicalSystems

ChristianityThisisthemostwidelypracticedreligionintheworld,approximately20%oftheworld’speopleidentifythemselvesasChristiansChristianitygrewoutofJudaismandhasmonotheisticbeliefsChristianitycanbesubdividedintothreeseparateorganizationsTheOrthodoxchurchTheRomanCatholicchurchProtestantswhichisanumbrellaforseveraldenominations

EconomicImplicationsofChristianitySeveralsociologistshavearguedthatprotestantshavemadeasignificanteconomicimpactMaxWebercommentedThatbusinessleadersandownersofcapital,aswellasthehighergradesofskilledlabor,andevenmorethehighertechnicallyandcommerciallytrainedpersonnelofmodernenterprises,areoverwhelminglyProtestant.ThatProtestantethicsemphasizetheimportanceofhardworkandwealthcreation(forthegloryofGod)andfrugality(abstinencefromworldlypleasures).Thatthecombinationofhardworkandtheaccumulationofcapital,whichcouldbeusedtofinanceinvestmentandexpansion,pavedthewayforthedevelopmentofcapitalisminWesternEuropeandsubsequentlyintheUnitedStates.IslamThecentralprincipleofIslamisthatthereisbuttheonetrueomnipotentGodIslamrequiresunconditionalacceptanceoftheuniqueness,power,andauthorityofGodandtheunderstandingthattheobjectiveoflifeistofulfillthedictatesofhiswillinthehopeofadmissiontoparadiseAccordingtoIslam,worldlygainandtemporalpowerareanillusionOthermajorprinciplesofIslaminclude:HonoringandrespectingparentsRespectingtherightsofothersBeinggenerousbutnotasquandererAvoidingkillingexceptforjustifiablecausesNotcommittingadulteryDealingjustlyandequitablywithothersBeingofpureheartandmindSafeguardingthepossessionsoforphansBeinghumbleandunpretentiousEconomicImplicationsofIslamTheKoranestablishessomeexpliciteconomicprinciples,manyofwhicharepro-freeenterpriseTheKoranspeaksapprovinglyoffreeenterpriseandofearninglegitimateprofitthroughtradeandcommerce(theprophetMohammedwasonceatrader)TheprotectionoftherighttoprivatepropertyisalsoembeddedwithinIslamIslamiscriticalofthosewhoearnprofitthroughtheexploitationofothersGiventheIslamicproclivitytofavormarket-basedsystems,MuslimcountriesarelikelytobereceptivetointernationalbusinessesaslongasthosebusinessesbehaveinamannerthatisconsistentwithIslamicethicsConfucianismFormorethan2,000yearsuntilthe1949Communistrevolution,ConfucianismwastheofficialethicalsystemofChina.Confucianismteachestheimportanceofattainingpersonalsalvationthroughrightaction.HighmoralandethicalconductandloyaltytoothersarecentraltoConfucianism.Unlikereligions,Confucianismisnotconcernedwiththesupernaturalandhaslittletosayabouttheconceptifasupremebeingoranafterlife.EconomicImplicationsofConfucianismThreevaluescentraltotheConfuciansystem:Loyaltytoone’ssuperiors–helpsreducetheconflictbetweenmanagementandlabor.Reciprocalobligation–superiorsareobligedtorewardtheloyaltyoftheirsubordinatesbybestowingblessingsonthem.ThisethiciscentraltotheChineseconceptofguanxi.Togetbusinessdone,guanxiisneeded.Honesty–Whencompaniescantrusteachothernottobreakcontractualobligations,thecostsofdoingbusinessarelowered.

LanguageSpokenVerbalcuesLanguagestructuresperceptionofworldWritten(examplesofsignsinEnglishinhotels)France:“Pleaseleaveyourvaluesatthedesk”Mexico:“Themanagerhaspersonallypassedallthewaterservedhere”Norway:“Ladiesarerequestednottohavechildreninthebar”Greece:“Wewillexecutecustomersinstrictrotation”UnspokenBodylanguagePersonalspace

EducationFormaleducationplaysakeyroleinasocietyFormaleducation:themediumthroughwhichindividualslearnmanyofthelanguage,conceptual,andmathematicalskillsthatareindispensableinamodernsocietyAlsosupplementsthefamily’sroleinsocializingtheyoungintothevaluesandnormsofasocietySchoolsteachbasicfactsaboutthesocialandpoliticalnatureofasociety,aswellasfocusingonthefundamentalobligationsofcitizenshipCulturalnormsarealsotaughtindirectlyatschoolExamplesinclude:respectforothers,obediencetoauthority,honesty,neatness,beingontimePartofthe“hiddencurriculum”TheuseofagradingsystemalsoteacheschildrenthevalueofpersonalachievementandcompetitionAreallifecaseAthree-generationfamilylivingtogether:AChineseladyFirstmarriagefailed(withanow10-year-olddaughter)–SecondmarriagewithanEnglishman-Chineselady’sparents:Adistinguished(retired)professorandahousewife.ThemainreasonfortheoldChinesecoupletostayintheUKistoeducatethegrand-daughterwhohasnowalreadycompletedA-levelmathematicsstudy.TheEnglishman’sparentsoftenaskwhentheoldChinesecouplewillgobacktoChina(implication–theirsonshouldhavehisownlifewithhiswife).TheChineseladyalsoasksherparentstostayinChinaforalongerperiod.TheoldChinesecoupleisfightingwiththeirdaughter–iftheEnglishmanlovestheirdaughter,heshouldalsolovetheoldChinesecouple.TheoldChinesecouplehasneverinterferedtheEnglishman’slife,andtheyhavetherighttostaythereandhelptheirgranddaughter.CultureintheWorkplaceFourdimensionsofculturebyHofstede(1980)Powerdistance-culturesarerankedhighorlowonthisdimensionbasedontheparticularsociety’sabilitytodealwithinequalitiesIndividualismversuscollectivism-thisdimensionfocusesontherelationshipbetweentheindividualandhis/herfellowswithinacultureUncertaintyavoidance-thisdimensionmeasurestheextenttowhichaculturesocializesitsmembersintoacceptingambiguoussituationsandtoleratinguncertaintyMasculinityversusfemininity-thisdimensionlooksattherelationshipbetweengenderandworkrolesWork-RelatedValuesfor

20SelectedCountriesHofstede’sCulturalDimensionsCriticisms:Assumptionofone-to-onerelationshipbetweencultureandnation-state.Researchmaybeculturallybound.Respondentsworkedwithinasingleindustry(computer)andasinglecompany(IBM).FourdimensionsmaynotbethemostimportantWorkisbeginningtolookdated(1967-1973).Hofstede’sFifthDimensionHofstedesubsequentlyexpandedhisoriginalresearchtoincludeafifthdimension:TimeOrientation,longtermorshortterm.HighLong-TermOrientationrankingindicatesthecountryprescribestothevaluesoflong-termcommitmentsandrespectfortradition.Long-term-orientedculturesarecharacterisedbypatience,perseverance,respectforone’seldersandancestors,andasenseofobedienceanddutytowardthelargergood(Hofstede1991,CulturesandOrganisations,McGraw-Hill).ThisdimensionmaybeparticularlyrelevantinAsia.

CulturalChangeCultureisnotaconstant;itevolvesovertimeSince1960sAmericanvaluestowardtheroleofwomenhavechangedJapanmovedtowardgreaterindividualismintheworkplaceGlobalizationwillcontinuetohaveimpactsonculturesaroundtheworld

ManagerialImplicationsCross-culturalliteracyDoingbusinessindifferentculturesrequiresadaptationtoconformwiththevaluesystemsandnormsofthatculture.ItcanbeseenasinsultingwhenayoungandjuniorAmericanexecutiveaddressesanoldandmoreseniorGermanmanagerbyhisfirstnamewithouthavingbeeninvitedtodoso.CultureandcompetitiveadvantageJapan’semphasisongroupaffiliation,loyalty,reciprocalobligation,honestandeducation–reducescostsofdoingbusinessinJapan.InternationalBusinessLecture3InternationalTradeTheory

Mercantilism:Mid-16thCenturyAnation’swealthdependsonaccumulatedtreasureGoldandsilverarethecurrencyoftradeTheorysaysyoushouldhaveatradesurplusMaximizeexportthroughsubsidiesMinimizeimports

throughtariffsandquotasFlaw:“zero-sumgame”

Mercantilism-Zero-SumGameIn1752,DavidHumepointedoutthat:IncreasedexportsleadtoinflationandhigherpricesIncreasedimportsleadtolowerpricesResult:CountryAsellslessbecauseofhighpricesandCountryBsellsmorebecauseoflowerpricesInthelongrun,noonecankeepatradesurplus

TheoryofAbsoluteAdvantageAdamSmithargued(WealthofNations,1776):CapabilityofonecountrytoproducemoreofaproductwiththesameamountofinputthananothercountrycanvaryAcountryshouldproduceonlygoodswhereitismostefficient,andtradeforthosegoodswhereitisnotefficientTradebetweencountriesis,therefore,beneficialAssumesthereisanabsolutebalanceamongnationsExample:Ghana/cocoa;SKorea/rice

TheoryofAbsoluteAdvantage

AbsoluteAdvantageandtheGainsFromTrade

TheoryofComparativeAdvantageDavidRicardo(PrinciplesofPoliticalEconomy,1817):ExtendsfreetradeargumentEfficiencyofresourceutilizationleadstomoreproductivityShouldimportevenifcountryismoreefficientintheproduct’sproductionthancountryfromwhichitisbuyingLooktoseehowmuchmoreefficientIfonlycomparativelyefficient,thanimportMakesbetteruseofresourcesTradeisapositive-sumgameTheoryofComparativeAdvantage

ComparativeAdvantageandtheGainsFromTrade

SimpleExtensionsoftheRicardianModelImmobileresources:ResourcesdonotalwaysmoveeasilyfromoneeconomicactivitytoanotherDiminishingreturns:Diminishingreturnstospecializationsuggeststhataftersomepoint,themoreunitsofagoodthecountryproduces,thegreatertheadditionalresourcesrequiredtoproduceanadditionalitemNotallresourcesareofthesamequality(marginalresources)Differentgoodsuseresourcesindifferentproportions

SimpleExtensionsoftheRicardianModelFreetrade(openeconomies):Freetrademightincreaseacountry’sstockofresources(aslaborandcapitalarrivesfromabroad)Increasetheefficiencyofresourceutilization

PPFUnderDiminishingReturns

InfluenceofFreeTradeonPPF

Heckscher(1919)-Olin(1933)TheoryExportgoodsthatintensivelyusefactorendowmentswhicharelocallyabundantCorollary:importgoodsmadefromlocallyscarcefactors

Note:Factorendowmentscanbeimpactedbygovernmentpolicy-minimumwagePatternsoftradearedeterminedbydifferencesinfactorendowments-notproductivityRemember,focusonrelativeadvantage,not

absoluteadvantage

ProductLife-CycleTheory-R.Vernon(1966)

Asproductsmature,bothlocationofsalesandoptimalproductionchangesAffectsthedirectionandflowofimportsandexports.E.g.XeroxinU.S.in1960s;Fuji-Xerox;Rank-Xerox;Canon,Olivetti,Singapore,Thailand.Globalizationandintegrationoftheeconomymakesthistheorylessvalid ProductlifecycletheoryNewTradeTheory

Thenewtradetheorybegantoemergeinthe1970swheneconomistspointedoutthattheabilityoffirmstoattaineconomiesofscalemighthaveimportantimplicationsforinternationaltrade.

Inindustrieswithhighfixedcosts:Specializationincreasesoutput,andtheabilitytoenhanceeconomiesofscaleincreasesLearningeffectsarehigh.Thesearecostsavingsthatcomefrom“l(fā)earningbydoing”

NewTradeTheory-ApplicationsTypically,requiresindustrieswithhigh,fixedcostsWorlddemandwillsupportfewcompetitorsMicrosoft’sWindowsoperatingsystemspreadsfixedcostsofdevelopingnewversionsto100millionPCs.Competitorsmayemergebecauseof“First-moveradvantage”EconomiesofscalemayprecludenewentrantsRoleofthegovernmentbecomessignificantSomearguethatitgeneratesgovernmentinterventionandstrategictradepolicyE.g.Boeing’sR&DcostwaslargelypaidbyUSGovt,asthe707wasaspin-offfromagovtfundedmilitaryprogram.

TheoryofNationalCompetitiveAdvantage

Thetheoryattemptstoanalyzethereasonsforanation’ssuccessinaparticularindustryPorterstudied100industriesin10nationsPostulateddeterminantsofcompetitiveadvantageofanationwerebasedonfourmajorattributesFactorendowmentsDemandconditionsRelatedandsupportingindustriesFirmstrategy,structureandrivalry

Porter’sDiamondSuccessoccurswheretheseattributesexistMore/greatertheattribute,thehigherchanceofsuccessThediamondismutuallyreinforcingPorter’sDiamond

FactorEndowmentsFactorendowments:Anation’spositioninfactorsofproductionsuchasskilledlabororinfrastructurenecessarytocompeteinagivenindustryBasicfactorendowmentsAdvancedfactorendowments

BasicFactorEndowmentsBasicfactors:FactorspresentinacountryNaturalresourcesClimateGeographiclocationDemographics

Whilebasicfactorscanprovideaninitialadvantagetheymustbesupportedbyadvancedfactorstomaintainsuccess

AdvancedFactorEndowmentsAdvancedfactors:Theresultofinvestmentbypeople,companies,andgovernmentaremorelikelytoleadtocompetitiveadvantage

Ifacountryhasnobasicfactors,itmustinvestinadvancedfactors

AdvancedFactorEndowmentsCommunicationsSkilledlabor ResearchTechnologyEducation

DemandConditionsDemand:createscapabilitiescreatessophisticatedanddemandingconsumersDemandimpactsqualityandinnovation

RelatedandSupportingIndustriesCreatesclustersofsupportingindustriesthatareinternationallycompetitiveMustalsomeetrequirementsofotherpartsoftheDiamondFirmStrategy,StructureandRivalryLongtermcorporatevisionisadeterminantofsuccessManagement‘ideology’andstructureofthefirmcaneitherhelporhurtyouPresenceofdomesticrivalryimprovesacompany’scompetitiveness

Porter’sTheoryPredictionsPorter’stheoryshouldpredictthepatternofinternationaltradethatweobserveintherealworld

Countriesshouldbeexportingproductsfromthoseindustrieswhereallfourcomponentsofthediamondarefavorable,whileimportinginthoseareaswherethecomponentsarenotfavorableImplicationsforBusinessLocationimplications:DisperseproductionactivitiestocountrieswheretheycanbeperformedmostefficientlyFirst-moverimplications:Investsubstantialfinancialresourcesinbuildingafirst-mover,orearly-moveradvantagePolicyimplications:Promotingfreetradeisinthebestinterestsofthehomecountry,notalwaysinthebestinterestsofthefirm,eventhoughmanyfirmspromoteopenmarketsInternationa