How Convincing Is Porters Model of National Competitive Advantage in Essay - 5

How Convincing Is Porters Model of National Competitive Advantage in Explaining the Characteristics and Performance of the Business Systems of Major Economies - Essay Example The paper tells that international competitiveness of countries is an ever-growing concern for firms, governments as well as academic scholars. International competitiveness is one of the most misused and misunderstood terms in the press and academic literature of the modern world. According to Daniels, there is no consensus on how to measure, explain and predict international competitiveness of countries. The true meaning and understanding of the international competitiveness of countries have been the subject of much debate. Porter popularized the implicit assumption underlying the management theories that a firms competitiveness can be extended to a country’s competitiveness using his diamond framework and the world competitiveness reports. There are two schools of thought; the economic school and management school. The economic school ignores the notion of country competitiveness. However, the management school supports the concept of country competitiveness. To properly e xplain the differing views on international competitiveness by economists, a little background on the differing trade theories is required. The review of the trade theories will provide a platform for the analysis of Porter’s Diamond framework. Adams Smith theory of absolute advantage was the first theory that attempted to explain why countries engage freely in international trade. According to this theory; a state can enhance its prosperity if it limits itself into producing goods and services that the country has a higher absolute cost advantage over other countries. The country should also import those goods and services in which it has an absolute cost disadvantage.