In 1990, national competitive advantage theory was stated by Michael Porter as a forth theory. His theory describes that is contingent on capacity of the industry to improve make a nation’s competitiveness in an industry. The theory also explains including with four elements to prove that even though country or industry is different, basis of national competitiveness is same.
One of the four elements in the Porter diamond is factor condition. This factor condition is a nation’s resources which is important element to produce and export products. Examples of resources are large labor force, natural resources, climate, or surface feature according to the text book. Porter states these resources as basic factors and also discussed the importance of advanced factors. Advanced factor is created by technological improvement and worker training. For example, the United States has an advantage in manufacture of airplanes. This advanced factor is result of improvement in technology and well-planned worker training.
The second element of Porter diamond is demand condition. Sophisticated buyers in the market are very important to national competitive advantage in a product area. Their demand for the product force to change existing product to improve technology, design or taste for consumer preference. Example of the demand condition is US computer software and French wine industry.
Porter also argued that a set of related and supporting industries is important to the competitiveness of the firms. This usually occurs at the same geographic area. Each industry in the cluster supports each other and strengthens the productivity. For example, Italy footwear industry is very successful in the world. This industry is actually benefit from leather-tanning and fashion-design ...