Question

For this unit's exercise take a look at one industry in a specific country and discuss the extent to which this industry has a competitive advantage as a consequence of being based in that particular country (e.g. South Korea in shipping, Denmark in hearing aids, Holland in tulips, Germany in high level engineering.)

Use Porter's four determinants of national competitive advantage:

i) factor conditions

ii) demand conditions

iii) related and supporting industries

iv) firm strategy, structure and rivals

Answer 1

Let us take the case of high-level engineering in Germany for instance:

i) Factor Conditions:

• Great Technological factor capabilities in the form of cutting - edge Automation R&D Labs to foster innovation
• Highly trained Manpower to do engineering tasks related to manufacturing, assembling, operations, etc. at a much faster rate.
• World class engineering institutes with eminent professors in Germany that feature in the top 100 in the QS university rankings year on year.
• Separate Budget allocated in the form of Start-up fund.

ii) Demand Conditions:

• Well -educated upper middle class have greater needs of high - end Engineering products and equipments for their day to day use like automobiles, household equipments.
• Germans have the tenacity to buy new upgraded products every now and then. They wish to be early adopters in the curve. Hence, the high local demand pushes the industries such as Automobile, Robotics to be innovating and upgrading now and then.'
• Increased local demand will eventually lead to spike in the global consumption level as there are chances of increased production levels, thereby leading to export of engineered goods.

iii) Related and supporting industries:

• There are plenty of German suppliers that provide low-cost raw materials to the Original Equipment manufacturers (OEMs).
• The stiff competition between the local suppliers lead to obtaining high quality component at a much lower rate. For example, Automobile companies like Audi, Volkswagen have more than to 3 suppliers who bid for supplying the same component.
• Millions of people are employed in these Tyre- manufacturing, and other peripherals manufacturing units.

iv) Firm Strategy, Structure, and rivals:

• Almost all of German companies are Hierarchal in nature. In other words, they follow a systematic approach towards each and every work they do. This has helped them a lot in decision making and scaling to the top.
• All the firms associated with engineering have the common goal of innovating for the better tomorrow. Thus, We use more of the capital reinvestment in Research in Development followed by skilling and training of employees.
• Also, the rivals in the given industry give first preference to the product quality and the attributes. So, it is very hard to differentiate or distinguish based on a list of parameters. Example : BMV Vs Audi: Both have sizeable Market share and yet both give the same preference to quality and safety metrics.