Summary
In this chapter, we focused on factors that help industries and countries achieve competitive
advantage. According to Porter’s five forces model, industry competition is a function of the
threat of new entrants, the threat of substitutes, the bargaining power of suppliers and buyers, and
rivalry among existing competitors. Managers can use Porter’s generic strategies model to
conceptualize possible sources of competitive advantage. A company can pursue broad market
strategies of cost leadership and differentiation or the more targeted approaches of cost focus
and focused differentiation. Rugman and D’Cruz have developed a framework known as the
flagship model to explain how networked business systems have achieved success in global
industries. Hamel and Prahalad have proposed an alternative framework for pursuing competitive
advantage, growing out of a firm’s strategic intent and use of competitive innovation. A firm can
build layers of advantage, search for loose bricks in a competitor’s defensive walls, change the
rules of engagement, or collaborate with competitors and utilize their technology and know-how.
Today, global competition is a reality in many industry sectors. Thus, competitive analysis must
also be carried out on a global scale. Global marketers must also have an understanding of national
sources of competitive advantage. Porter has described four determinants of national advantage.
Factor conditions include human, physical, knowledge, capital, and infrastructure resources.
Demand conditions include the composition, size, and growth pattern of home demand. The rate of
home market growth and the means by which a nation’s products are pulled into foreign markets also
affect demand conditions. The final two determinants are the presence of related and supporting
industries and the nature of firm strategy, structure, and rivalry. Porter notes that chance and
government also influence a nation’s competitive advantage. Porter’s work has been the catalyst
for promising new research into strategy issues, including D’Aveni’s work on hypercompetition
and Rugman’s recent double-diamond framework for national competitive advantage.