The Competitive Advantage Of Nations

Porter discusses the implications of his theory of national advantage, and its related concrete case studies, for company strategy. He argues that while certain national contexts are more favorable to competitive success in specific industries than others, it does not follow that all firms in a successful nation, in a given area, will succeed. This is because “the most important sources of national advantage must be actively sought and exploited” (577). Unlike basic factor costs, these advantages do not result from a firm’s mere presence in the nation. Instead, “it is up to a company to seize the opportunity” (578).

The first way a firm can do this, and effectively exploit its home base, is by seeking out pressures and challenges that force it to innovate and upgrade. It can achieve this in several ways. It can try to sell to the most demanding and sophisticated buyers. This will provide vital information about trends and force a company to pursue cutting-edge products. It can also have a long-term attitude toward employees. By treating staff as potentially permanent, firms have an incentive to invest in them to upgrade productivity. Employees are also more likely to be committed to, and invest extra in, the firm because they know their future is bound up with its success.