Competitive Advantage of Nations

by Michael E. Porter

With the publication of his best-selling books "Competitive Strategy (1980) and "Competitive Advantage (1985), Michael E. Porter of the Harvard Business School established himself as the world's leading authority on competitive advantage. Now, at a time when economic performance rather than military might will be the index of national strength, Porter builds on the seminal ideas of his earlier works to explore what makes a nation's firms and industries competitive in global markets and propels a whole nation's economy. In so doing, he presents a brilliant new paradigm which, in addition to its practical applications, may well supplant the 200-year-old concept of "comparative advantage" in economic analysis of international competitiveness. To write this important new work, Porter and his associates conducted in-country research in ten leading nations, closely studying the patterns of industry success as well as the company strategies and national policies that achieved it. The nations are Britain, Denmark, Germany, Italy, Japan, Korea, Singapore, Sweden, Switzerland, and the United States. The three leading industrial powers are included, as well as other nations intentionally varied in size, government policy toward industry, social philosophy, and geography.

Porter's research identifies the fundamental determinants of national competitive advantage in an industry, and how they work together as a system. He explains the important phenomenon of "clustering," in which related groups of successful firms and industries emerge in one nation to gain leading positions in the world market. Among the over 100 industries examined are the German chemical and printing industries, Swisstextile equipment and pharmaceuticals, Swedish mining equipment and truck manufacturing, Italian fabric and home appliances, and American computer software and movies. Building on his theory of national advantage in industries and clusters, Porter identifies the stages of competitive development through which entire national economies advance and decline.

Porter's finding are rich in implications for both firms and governments. He describes how a company can tap and extend its nation's advantages in international competition. He provides a blueprint for government policy to enhance national competitive advantage and also outlines the agendas in the years ahead for the nations studied. This is a work which will become the standard for all further discussions of global competition and the sources of the new wealth of nations.

Genres: Economics, Business, Nonfiction, Politics, Management, History, Finance

855 pages, Hardcover

First published May 1, 1990

About the author

Michael E. Porter is the leading authority on competitive strategy, the competitiveness and economic development of nations, states, and regions, and the application of competitive principles to social problems such as health care, the environment, and corporate responsibility.

Professor Porter is generally recognized as the "Father of Strategy", as has been identified in a variety of rankings and surveys as the world’s most influential thinker on management and competitiveness. He has ranked #1 on "Thinkers 50".

He is the Bishop William Lawrence University Professor, based at Harvard Business School. A University full-professorship is the highest professional recognition that can be awarded to a Harvard faculty member.

In 2001, Harvard Business School and Harvard University jointly created the Institute for Strategy and Competitiveness, dedicated to furthering Porter’s work.

Professor Porter is the author of 17 books and over 125 articles. He is the founder of elite strategy consulting firm, the Monitor Group.


He received a B.S.E. with high honors in aerospace and mechanical engineering from Princeton University in 1969, where he was elected to Phi Beta Kappa and Tau Beta Pi. He received an M.B.A. with high distinction in 1971 from the Harvard Business School, where he was a George F. Baker Scholar, and a Ph.D. in Business Economics from Harvard University in 1973.

Reviews

[Leonard · Rating 5 out of 5]

The business guru's analysis of how nations can compete in the global market by building capabilities and strengths that leverages their resources, culture and society. Years ago, Singapore had hired him to develop a strategic roadmap and the country is competing sucessfully in today's dog-eat-dog international market. The U.S. clearly has unique strengths and capabilities and if the government can encourage the development in these areas and outrun the competition, then we can continue to lead the global economy.

[Alex Timberman · Rating 5 out of 5]

Michael Porter at Harvard is one of the most famous business professors in the world, if not the most famous. He is known for business strategy and the 5 forces model as well as cluster theory among other works.

This book was on the determinants of national success. He takes a look at 8 nations among which are Germany, Sweden, Korea, Japan, Italy, and the United States. His point of measurement is the industry and the firms that make up the industry. Each nation has factor conditions or natural endowments along with demand conditions or the characteristics of the home consumer market that shapes how firms in a nation develop into thriving industries.

If you are a student of history, this business book will be interesting to you. He actually (with the help of a team of worldwide researchers) goes over the history of each nation and explains why certain countries are good or better in certain industries than others. And he explains what conditions of the nation gave rise to the successful industries of each nation.

Professor Porter really wrote a terrific book. Anything to do with innovation and surrounding policies are said here; I feel like recent relevant literature on business strategy and innovation are just expounding on what Porter said in 1990, albeit in a slightly different way. Of course he borrowed from past teachers as well but I don’t recall anyone speaking of strategy and innovation with such clarity before him.

Even some of his predictions on Korea, a country I’m familiar with, turned out to become remarkably accurate. This book is readable for the non-specialist and is a must-read for any student of business.

[Mike · Rating 4 out of 5]

Michael Porter's theories are taught, often with little critique, around the world in business courses. His ideas are clear, the rationale behind them often understandable and solid. But business changes, and although we cannot expect printed words to evolve with the world around them, to set an economic model out as 'how things work' has proven ill-judged. The narrow band of nations from which Porter drew his conclusions has certainly not helped 'Competitive Advantage' avoid criticisms. Nor has its publication shortly before the tech revolution helped it to remain modern.

Porter's ideas are very useful, especially when combined with other models, so long as the reader understands that a concept is rarely anything other than a snapshot of how things were at the time of writing. Viewed in that context, 'Competitive Advantage', like his other works, will continue to offer guidance. Looked at in isolation, the rot sets into most business models almost as soon as the printing presses whir, and this is no exception.

[Vikum Silva]

ZXZXZX

[Hieu · Rating 4 out of 5]

Although the book was published 2 decades ago and many of the ideas are now so popular that they are cliché, the overall thesis of this book with emphasis on competition and role of home demand, among others, could still good lessons to policy makers and business leaders in many countries.

Vietnam, with its protectionist approach and habit of commanding the economy, can still find inspiration to resolve its struggle to home-grow industries such as automobile or to sustain telecom. Business leaders should also consider Porter's point about getting access to demanding segments/markets as a source for long-term competitiveness upgrading.

While the overall thesis is convincing, which therefore has gained traction since publication, the weak point of this book is excessive reliance on qualitative narration to present the ideas. It is hard to maintain the interest for hundreds of descriptive pages about various industries of different countries.

Also, time proved that some of the "success lessons", such as that of the keiretsu model in Japan, is actually doomed.

Still a good read overall.

[Marcus Kang · Rating 4 out of 5]

Despite accolade on the book from the world, I found Porter's book about national competitiveness a but verbose, repeating the same points over and over again. Such reiterations have significantly distracted my attention to focus on the core messages. But his idea on national competitiveness, which is well represented with Porter's diamond, is unparalleled in its implications and insights. The book provokes the readers to think about what's true lever to grow a nation's economy in such a competitive global market. Certainly it is better than simple monetary policy book.

[Jonathan Dapra · Rating 5 out of 5]

This is one of my favorite books about the world and business. I first read it in grad school and it just spark so much within me. You don't have to be a business person to enjoy this book. It will just amaze you when you see how culture and national identity help to form some of the reasons you are successful.

[Nanto]

Buku ini idenya hampir sama dengan buku Michael E. Porter on Competition, namun unit analisanya bergeser dari perusahaan ke negara. Selebihnya, buka-buka lagi dulu deh gue. :D

[Noric Dilanchian · Rating 4 out of 5]

Extraordinary scholarship. Developed and tested many new concepts. However many of them are now dated approaches to business as the market has changed, for example given the use of digital platforms in most economies today.

[Todd Cheng · Rating 5 out of 5]

This book, 'The Competitive Advantage of Nations' by Michael Porter, is an exhaustive synthesis of several national systems and their impact on economic competition. The author's final analysis begins with an investigation of competition factors within an organization and builds upon themes between organizations. Through this exploration, the book covers the differences between national systems of organization, including national education systems, management methods, national business policy, and the role of culture in the economy and competition between nations.

Moreover, the book conveys that the competitive advantage of a nation is not solely dependent on its natural endowments, but is also shaped by the interaction of its domestic institutions, policies, and business strategies. Porter emphasizes the importance of factors such as the sophistication of domestic demand, the quality of domestic supporting industries, and the presence of related and supporting industries in the same location. He also explores the role of clusters, or geographic concentrations of related industries and supporting institutions, in enhancing a nation's competitiveness.

Overall, this book offers a richer context to contrast culture, country, and national systems, providing the reader with an understanding of economic undulations. It provides subtle insights into the uniqueness of a nation and its culture, and is a dense collection of concepts that interlink histories, sciences, and occasionally eccentric concepts. This material is dense enough that one may need to read it again to fully grasp its content.

Porter, Drucker, and Demming are all good oracles in the analysis of business, management, and culture. This book too was a good use of time. Grateful though to be done with dense trilogy in the topic.

[Andrew · Rating 2 out of 5]

I'm hesitant to write too much about this book, because the last time I wrote something for GoodReads it censored it and I don't even know why. I really did take about thirteen years to read this book. But I bought it with my own money and read 738 pages so surely I can say whatever I want about it.

This book, albeit a small portion was in both my MBA and the CFA curriculum. However it is only a small portion and the fact I completed the CFA program before finishing this book tells you how long and dry it is. The research ceases in the 80s so a lot has happened in the last few years whether it is the rise of China, the increase in offshoring, the return of near shoring, the pandemic etc. Surely Porter or someone has updated the research and theories, but I vowed to finish this book and I did so this year, but I can't really recommend it. I could have done a lot with my life instead of reading this book however I finished it, but I'll be extremely hesitant to press on through a book this long and dry again. Emanuel Kant likely is going to remain unfinished, there are just a lot more books I think I would enjoy more instead of forcing myself to read this on my weekends.

I finished many other books during the last thirteen years so that say a lot about how engrossing this is to read. You can very much put it down. And I usually don't recommend reading the Wikipedia summary but yeah most people don't read this book, they just read a summary.

[Jimmy · Rating 5 out of 5]

It's a superlative book, although it's really hard to read.

It introduces the "diamond", clusters, and their dynamism. Different stages of advantage development. And implications for companies and governments. It also includes deep case studies and agendas for several industries and countries, although I didn't read them.

[Puwa]

Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape every industry and helps determine an industry's weaknesses and strengths. (Reference from Google)

https://www.investopedia.com/terms/p/...

[Jim Robles · Rating 5 out of 5]

In his seminal work The Competitive Advantage of Nations, Michael Porter established that one of the four “determinants of national advantage” is “demand conditions.” [Porter, 1990, Figure 3-1]

Nations gain competitive advantage in industries or industry segments where the home demand gives local firms a clearer or earlier picture of buyer needs than foreign rivals can have. Nations also gain advantage if homebuyers pressure local firms to innovate faster and achieve more sophisticated competitive advantages compared to foreign rivals. [Porter, 1990, p. 86]

Particularly beneficial are stringent regulations that anticipate standards that will spread internationally. These give a nation’s firms a head start in developing products and services that will be valued elsewhere. . . . Tough standards also encourage the start-up of specialized manufacturing and service firms to address them. . . . As Germany, Sweden, and Denmark have moved ahead of the United States in standards governing a number of aspects of environmental quality, their firms in these areas are increasingly supplying world markets. [Porter, 1990, p. 648]

Stringent environmental regulations help companies gain long-term competitive advantage.

Reference:

Porter, Michael E. (1990). The Competitive Advantage of Nations. The Free Press, A Division of Macmillan.

[Sathya Vijayakumar · Rating 5 out of 5]

I've been reading about business and economics regularly for well over a decade, and it takes a lot to introduce anything comprehensive that might surprise me on the subjects. This book met that standard by presenting a new perspective on the way national economies both progress and sustain advantage in industries. Porter analyzes the histories of nations around the world, presenting 8 national case studies to elucidate his findings. Along the way, he introduces the concept of economic clusters as well as Porter's Diamond, a framework to capture the conditions that allow a nation to have advantage in a given industry. The book deviates from the topics of Competitive Strategy and Competitive Advantage, as he moves away from firms to the level of industries and nations.

Overall, the book is fairly dense and took me much longer than most books to complete. This is because it reads much like a textbook and the concepts build on each other, so you really need to absorb and learn each idea to follow along later in the book. However, the reader who takes the time to finish the book will find that it was time and effort well spent. While the least heralded and least well known of Porter's 3 books, I believe this one is the best.

[Raj · Rating 5 out of 5]

Porter's Diamond is a wonderful model which acts as the crux to the prime strategies and necessary conditions for national development. He stresses that US clearly has unique strengths and capabilities and if the government can encourage the development in these areas and outrun the competition, then we can continue to lead the global economy. He not only contributed to Singapore but also introduced to many Latin American Countries with the Porter model specially in the late nineties and 2000.

[Peter Michael · Rating 5 out of 5]

Porter's expansion of his landmark "On Competition" identifies investment in human capital and Porter's Diamond as the prime strategies and necessary conditions for national development. Singapore and the United Sates are cited as the leading examples.

[Reid Corcoran · Rating 4 out of 5]

You need a "competitive factor disadvantage" in all things...

[Jae Oh · Rating 1 out of 5]

To a well-read student in economics, there is barely an original thought in this book. If you know nothing about economic history, it can be of use.

[Abel Caine fiji · Rating 5 out of 5]

Still a powerful methodology for assessing and identifying a country's true potential. Pre-Internet so it should be showing its age.