Aiming to increase understanding of global business issues, this text fosters a global business mindset for managers of small, medium and large companies. It approaches international business from a Southern African and global perspective, exploring Southern Africa's place in the global village. Innovation is a vital process for any business to remain competitive in this age. This progress must be coherently and optimally managed, allowing for successful improvement and future growth.
The Handbook of Research on Strategic Innovation Management for Improved Competitive Advantage provides emerging research on the use of information and. Prahalad, published by Unknown which was released on Global Competitive Strategy. Global Competitive Strategy by Daniel F.
Fundamentals of Global Strategy by Cornelis A. Competitive Advantage by Michael E. It also contains detailed descriptions of the In the second part of the study, we examined the nations we studied and the future prospects for their history of competition in particular industries to under- economies. On the — Michael E. International Markets This is why innovators are often outsiders from a different industry or a different country. Innovation Around the world, companies that have achieved may come from a new company, whose founder has international leadership employ strategies that differ a nontraditional background or was simply not ap- from each other in every respect.
But while every preciated in an older, established company. Or the successful company will employ its own particular capacity for innovation may come into an existing strategy, the underlying mode of operation— the company through senior managers who are new to character and trajectory of all successful compa- the particular industry and thus more able to per- nies— is fundamentally the same.
Companies achieve competitive advantage Or innovation may occur as a company diversifies, through acts of innovation. They approach innova- bringing new resources, skills, or perspectives to an- tion in its broadest sense, including both new other industry. Or innovations may come from technologies and new ways of doing things.
They another nation with different circumstances or dif- perceive a new basis for competing or find better ferent ways of competing. Innovation can be With few exceptions, innovation is the result of manifested in a new product design, a new produc- unusual effort. The company that successfully im- tion process, a new marketing approach, or a new plements a new or better way of competing pursues way of conducting training.
Much innovation is its approach with dogged determination, often in the mundane and incremental, depending more on a cu- face of harsh criticism and tough obstacles. In fact, mulation of small insights and advances than on a to succeed, innovation usually requires pressure, ne- single, major technological breakthrough. It Once a company achieves competitive advantage always involves investments in skill and knowledge, through an innovation, it can sustain it only through as well as in physical assets and brand reputations.
Almost any advantage Some innovations create competitive advantage by can be imitated. Korean companies have already perceiving an entirely new market opportunity or by matched the ability of their Japanese rivals to mass- serving a market segment that others have ignored. For instance, in designs comparable to Italian competitors in casual industries such as autos and home electronics, Japa- leather footwear. Sometimes early-mover advantages such as profitable, less important, and less attractive.
For example, as international concern its entrenched position for years or even decades. But for product safety has grown, Swedish companies sooner or later, more dynamic rivals will find a way like Volvo, Atlas Copco, and AGA have succeeded to innovate around these advantages or create a bet- by anticipating the market opportunity in this area.
Italian appliance On the other hand, innovations that respond to con- producers, which competed successfully on the basis cerns or circumstances that are peculiar to the home of cost in selling midsize and compact appliances market can actually retard international competitive through large retail chains, rested too long on this success.
The lure of the huge U. By developing more differentiated instance, has diverted the attention of U. Ultimately, the only way to sustain a competitive Information plays a large role in the process of advantage is to upgrade it— to move to more sophisti- innovation and improvement— information that ei- cated types. This is precisely what Japanese auto- ther is not available to competitors or that they do makers have done.
They initially penetrated foreign not seek. Sometimes it comes from simple invest- markets with small, inexpensive compact cars of ad- ment in research and development or market re- equate quality and competed on the basis of lower search; more often, it comes from effort and from labor costs.
National competitiveness has become one of the cen- held view that powerful unions undermine competitive tral preoccupations of government and industry in every advantage, unions are strong in Germany and Sweden— nation. Yet for all the discussion, debate, and writing and both countries boast internationally preeminent on the topic, there is still no persuasive theory to explain companies.
While the notion of a com- petitive position of industries within a national border. Some see national competitiveness as a macroeco- The lack of a clear explanation signals an even more nomic phenomenon, driven by variables such as ex- fundamental question.
No nation idly rising living standards despite budget deficits; Ger- meets this test. But Germany, Switzerland, kets? Both Germany and Japan have enjoyed remarkable and Sweden have all prospered even with high wages gains in their standards of living— and experienced sus- and labor shortages.
Besides, shouldn't a nation seek tained periods of strong currency and rising prices. Switzerland has roughly balanced trade; Italy Another view connects competitiveness with bounti- has a chronic trade deficit— both nations enjoy strongly ful natural resources.
But how, then, can one explain rising national income. India and Mexico both have low South Korea— countries with limited natural resources? The principal goal of have propelled Japanese and South Korean auto, steel, a nation is to produce a high and rising standard of living shipbuilding, and semiconductor industries into global for its citizens.
The ability to do so depends on the preeminence. But a closer look reveals a spotty record. Productivity is the value of the output but Italy has experienced a boom in world export share produced by a unit of labor or capital. Productivity de- second only to Japan. In Germany, direct government pends on both the quality and features of products intervention in exporting industries is rare. And even which determine the prices that they can command in Japan and South Korea, government's role in such and the efficiency with which they are produced.
Pro- important industries as facsimile machines, copiers, ro- ductivity is the prime determinant of a nation's long- botics, and advanced materials has been modest; some run standard of living; it is the root cause of national of the most frequently cited examples, such as sewing per capita income. The productivity of human resources machines, steel, and shipbuilding, are now quite dated. The problem here, how- A nation's standard of living depends on the capacity ever, is that different industries require different ap- of its companies to achieve high levels of productivity— proaches to management.
The successful management and to increase productivity over time. Sustained pro- practices governing small, private, and loosely orga- ductivity growth requires that an economy continually nized Italian family companies in footwear, textiles, upgrade itself. A nation's companies must relentlessly and jewelry, for example, would produce a management improve productivity in existing industries by raising disaster if applied to German chemical or auto compa- product quality, adding desirable features, improving nies, Swiss pharmaceutical makers, or American air- product technology, or boosting production efficiency.
Nor is it possible to generalize about They must develop the necessary capabilities to com- management-labor relations. They must finally performance cars, while Korean exports are all compacts develop the capability to compete in entirely new, so- and subcompacts.
In many industries and segments of phisticated industries. Our search, then, is for the decisive characteristic of They support rising national productivity by allowing a nation that allows its companies to create and sustain a nation to specialize in those industries and segments competitive advantage in particular fields— the search of industries where its companies are more productive is for the competitive advantage of nations. We are par- and to import where its companies are less productive.
The ideal national success in technology- and skill-intensive is to deploy the nation's limited pool of human and segments and industries, which underpin high and ris- other resources into the most productive uses.
Even ing productivity. Na- Yet international trade and foreign investment also tions gain factor-based comparative advantage in can threaten productivity growth.
They expose a na- industries that make intensive use of the factors they tion's industries to the test of international standards possess in abundance. Classical theory, however, has of productivity.
If a nation of technology. What a new theory must explain is why a trade surplus or balanced trade per se is inappropriate. The home base is the na- weak currency, at the same time that the nation imports tion in which the essential competitive advantages of sophisticated goods that its companies cannot produce the enterprise are created and sustained. Competitive- process technology is created and maintained, and ness also does not mean jobs.
It's the type of jobs, not where the most productive jobs and most advanced just the ability to employ citizens at low wages, that is skills are located. The presence of the home base in a decisive for economic prosperity. What we in the nation's economy. While the ownership of the must understand instead is the determinants of produc- company is often concentrated at the home base, the tivity and the rate of productivity growth.
To find an- nationality of shareholders is secondary. We tage to the competitive advantage of a nation. It must must understand how and why commercially viable reflect a rich conception of competition that includes skills and technology are created, which can only be segmented markets, differentiated products, technology fully understood at the level of particular industries. It differences, and economies of scale. A new theory must is the outcome of the thousands of struggles for compet- go beyond cost and explain why companies from some itive advantage against foreign rivals in particular seg- nations are better than others at creating advantages ments and industries, in which products and processes based on quality, features, and new product innovation.
Why do some nations pro- tries in competitive success. International advantage vide an environment that enables companies to improve is often concentrated in particular industry segments. German exports of cars are heavily skewed toward high- — Michael E. They invested aggressively to build large ruthlessly pursue improvements, seeking an ever- modern plants to reap economies of scale.
Then they more sophisticated source of competitive advantage? These process improve- pany success? Most recently, Japanese au- tute the diamond of national advantage, the playing tomakers have advanced to the vanguard of product field that each nation establishes and operates for its technology and are introducing new, premium brand industries.
These attributes are. Factor Conditions. The nation's position in fac- The example of the Japanese automakers also illus- tors of production, such as skilled labor or infra- trates two additional prerequisites for sustaining structure, necessary to compete in a given competitive advantage. First, a company must adopt industry. It must sell its product 2. Demand Conditions. The nature of home-mar- worldwide, under its own brand name, through inter- ket demand for the industry's product or service.
A truly 3. Related and Supporting Industries. Firm Strategy, Structure, and Rivalry. The con- eign technology. Second, creating more sustainable ditions in the nation governing how companies advantages often means that a company must make are created, organized, and managed, as well as its existing advantage obsolete— even while it is still the nature of domestic rivalry. Japanese auto companies recognized These determinants create the national environ- this; either they would make their advantage obso- ment in which companies are born and learn how lete, or a competitor would do it for them.
But change is an unnat- ural act, particularly in successful companies; power- ful forces are at work to avoid and defeat it. Past approaches become institutionalized in standard op- erating procedures and management controls.
Train- Determinants of National ing emphasizes the one correct way to do anything; Competitive Advantage the construction of specialized, dedicated facilities solidifies past practice into expensive brick and mor- tar; the existing strategy takes on an aura of invinci- Firm Strategy, Structure, bility and becomes rooted in the company culture. Change is tempered by the fear that there is much to lose. The organization at all levels filters out information that would suggest new approaches, modifications, or departures from the Factor Demand Conditions Conditions norm.
Innovation ceases; the company becomes stagnant; it is only a matter of time before aggressive competitors overtake it. Related and Supporting Industries The Diamond of National Advantage Why are certain companies based in certain na- tions capable of consistent innovation? Competitive advan- dustry; the information that shapes the opportuni- tage results from the presence of world-class ties that companies perceive and the directions in institutions that first create specialized factors and which they deploy their resources and skills; the then continually work to upgrade them.
Denmark goals of the owners, managers, and individuals in has two hospitals that concentrate in studying and companies; and most important, the pressures on treating diabetes— and a world-leading export posi- companies to invest and innovate.
See the insert tion in insulin. When a national environment permits and sup- What is not so obvious, however, is that selective ports the most rapid accumulation of specialized disadvantages in the more basic factors can prod a assets and skills— sometimes simply because of company to innovate and upgrade— a disadvantage greater effort and commitment— companies gain a in a static model of competition can become an ad- competitive advantage.
When a national environ- vantage in a dynamic one. Porter shows how traditional comparative advantages such as natural resources and pools of labor have been superseded as sources of prosperity, and how broad macroeconomic accounts of competitiveness are insufficient. His ideas and personal involvement have shaped strategy in countries as diverse as the Netherlands, Portugal, Taiwan, Costa Rica, and India, and regions such as Massachusetts, California, and the Basque country.
Hundreds of cluster initiatives have flourished throughout the world. In an era of intensifying global competition, this pathbreaking book on the new wealth of nations has become the standard by which all future work must be measured. Based on research in ten leading trading nations, The Competitive. Internet Archive's 25th Anniversary Logo. Search icon An illustration of a magnifying glass. User icon An illustration of a person's head and chest.
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