Competitive Advantage TheoryBy Michael Porter

Presented by –

rahul

Competitive Advantage and Competitiveness

• Competitive advantage

resides inside the company.

• Competitive success depends

on company choices.

• Competitive advantage resides in

the locations in which the

company is based.

• Cluster participation is an

important contributor to

competitiveness.

Internal External

What is Competitiveness?

Competitiveness depends on the productivity

- Productivity sets the sustainable standard of

living

- How productively a nation competes

- Combination of domestic and foreign firms

Nations compete to offer the most productive

environment for business

The public and private sectors play different but

interrelated roles in creating a productive

company

Competitive Advantage Theory of Nations

• Depends on the collective

advantage of the nation’s

firms

• Over times, the relationship

becomes reciprocal:

competitive advantage held

by the nation drives the

development of new firms

and industries with the same

competitive advantage.

Examples

Competitive Advantage Theory of Firms

• Possession of sources of distinctive competence

relative to others.

• E.g. –

Nokia

Wal Mart and Tesco

Southeast Asia

Economic coordination among neighboring countries can enhance

competitiveness

How Do Nations Gain Competitive Advantage?

INNOVATION

• Aggregate innovation capacity derived from collective innovation of firms

• More innovative firms, stronger nation’s competitive advantage

• Innovation promotes productivity; leads to efficient use of resources

• Productivity – key determinant of nation’s standard of living and national per-capita income