Porter's National Competitive Advantage Theory. One of Essay

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Porter's National Competitive Advantage Theory.

One of the principal differences between Porter's model and the traditional economic theories is that the latter emphasize what Porter refers to as "passive" factors such as land, location, and natural resources whereas Porter's model de-emphasizes such factors by virtue of their being passive and relatively unchangeable (George & Jones, 2008). Porter's model also defines the role of government as a stimulator of business growth in general and of competition between businesses in particular. In that regard, Porter argues that government should stimulate commerce and the demand for the products of business organization as well as to stimulate direct competition between and among business entities such as through enacting anti-trust legislation (George & Jones, 2008).

According to Porter's Competitive Advantage Theory, the relative economic competitive advantage of nations is directly dependent on the relationship between and among the following clusters of entities: (1) interconnected business organizations, (2) suppliers, (3) similarly situated industries, and (4) institutions (George & Jones, 2008; Robbins & Judge, 2009).

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The interactions and relationships of entities within those four clusters determines the competitive advantage of nations based on four specific factors or elements outlined by Porter: (1) Business organization structure, strategy, and competition, (2) Conditions that determine consumer demand, (3) Supporting industries, and (4) Infrastructure, capital, and skilled labor (George & Jones, 2008; Robbins & Judge, 2009). The first factor is a function of direct competition for revenue; the second factor means that demand conditions set by consumers determine the necessary direction of product development; the third factor pertains to the interrelationships and mutual reliance of various components within industries; and the fourth factor are….....

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