Competitive advantage of nation’s theory
Michael Porter introduced the Diamond model for competitive advantage of nations that analyses the competitiveness of a nation or even a major geographic region in the global competition. This moves away from the traditional economic factor of comparative advantage of countries such as land, resources, labor, population and location (Porter, 2009).
He said that these are passive factors since they can actually undermine the competitive advantage of a nation and cannot guarantee a sustained industrial growth. The competitive advantage of nations arises from four interlinked factors and activities by companies within or between clusters. Proactive governments influence on these factors complete the picture (Hanson et al, 2011).
The factors of competitive advantage of nations include; factor conditions which are defined as the necessary inputs into an industry to allow competition. These include human, physical, knowledge, capital and infrastructure resources. For a competitive nation in these factors mere availability is not enough.
Their richness in categorization, deployment and creation and factor disadvantages play a major role (Porter, 1990). Demand factors in the competitive model move beyond market size to encompass the nature of the market, level of sophistication and demand of local buyers and how these local buyers relate to the global trends and markets (Ankli, 1992).
Related and supporting industries in the Diamond model mean the presence of such industries locally and who are also competitive internationally. These are important since they provide the vital industries with low-cost, high quality and early access to inputs. They also provide new ideas which fuel innovation (Kogut, 2001).
Lastly, firm strategy, structure and rivalry factor which encompasses domestic firm strategy and structure that utilizes the competitive advantage of the national environment, goals that are oriented to the sources of competitive advantage of a nation and domestic rivalry among strong domestic rivals who will be forced to look for new markets elsewhere (Grant, 2001).
Outside these factors of competitive advantage of a nation are two important elements. These include; chance which comprise elements outside the firms or sectors control such as wars, demand surges and major technological advancements (Serin & Civan, 2008).
Government policy influence the competitive advantage of nations by negatively or positively impacting the four factors of competitive advantage but on itself it cannot construct competitive advantage (Hanson, Hitt, & Hoskisson, 2011).
Competitive advantage of Greece
The geographical location of Greece at the crossroads of North and South, East and West provide the country with an advantage of accessing emerging markets in all locations be it in Europe, Asia and Middle East (Sultana, 2011).
These emerging markets have a combined GDP of about 1 trillion Euro as Porter, (2010) says and a population of about 350 million people who are composed of consumers that portray a demand for new products every year for a long time to come. The Greece population enjoys a high income and high standards of living where the country was ranked 22nd by the Human development Index in 2010 (Hanson, Hitt, & Hoskisson, 2011).
Greece has a population of 10,787,690 according to the preliminary results for the 2011 Census, which provides an advantage in human capital. The labor force consists of 4.9 million people. The country is positioned in the third place in “working hour per year ranking’ among the European countries with an average of 1,811 working hour per year.
Before the recession in 2007, the country average worker produced 20 dollars per hour. In South East Europe, Greece boasts of the most well educated and trained workforces. This workforce is well versed with foreign languages (Hanson, Hitt, & Hoskisson, 2011).
Greece has a natural resources base that is the most attractive in Southeast Europe. These have resulted into a vibrant tourism industry cluster, food and beverages sector and renewable energy development sector according to Porter, (2010). The geography of the country with its many islands and sandy beaches coupled with a favorable climate has provided the country with a flourishing tourism industry.
It contributes to 20% of the GDP and has shown strong signs of growth since the country records a higher number of tourists each year than the local population (Dimireva, 2009). The climate and technological advancement in the agricultural sector has also ensured a healthy, year round agricultural output which has supported the food and beverage cluster (Vaknin, 2008).
In terms of the renewable energy sources, Greece boasts one of the best aeolic profiles in Europe and also in solar density. The country is also investing heavily in the biomass and biofuel production (Kakissis, 2010).
Other competitive factors include increased collaboration between businesses and universities/ research institutes, easy access to loans from the European Monitory Union (EMU) which have resulted to low interest rates, financial market sophistication and advancement in communication and transport infrastructure among others as New York Times Dealbook, (2010) notes.
However, there are still factors that hinder the competitiveness of Greece as a country which include; an aging population that saw a drop in population by 1.6% in 2011 from the 2001 census (Ministry of Foreign Affairs, 2011). The debt crisis in relation to GDP is one of the highest in the European Union which has been concealed by successive governments but has now come to haunt the country.
In relation to this, the country was given a bailout by the EU on condition that it adopts austerity measures on spending which in turn have triggered strikes by trade Unions, riots and demonstrations (Ewing, 2010). This coupled with rising levels of unemployment may lower the competitiveness of the country (Porter, 2010).
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Dimireva, I. (2009, October 29). Greece Investment Climate 2009. EU Business.
Ewing, J. (2010, April 29). Already Holding Junk, Germany Hesitates. New York Times, p. B1.
Grant, R. (2001). Porter’s ‘Compeetitive Advantage of nations’: An Assessment. Strategic Management Journal , 535-548.
Hanson, D., Hitt, M., & Hoskisson, R. (2011). Strategic management: Competitiveness and Globalisation. Melbourne: Cengage.
Kakissis, J. (2010, October 17). Behind Greece’s Courting of Foreign Investment. Time Business.
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Serin, V., & Civan, A. (2008). Revealed Comparative Advantage and Competitiveness: A Case Study for Turkey Towards the EU. Journal of Economics and Social Research , 25-41.
Sultana, C. (2011, September 28). GO’s Greece Investment Devalues by €25.3m. The Malta Business Weekly , p. B3.
Vaknin, S. (2008, March 12). Greece and its Investments in the Balkans: Trojan Horse or Reliable Partner? Web.