The competitive advantage of nations

The focus of early trade theory was on the country or nation and its inherent, natural, or endowment characteristics that might give rise to increasing competitiveness. As trade theory evolved, it shifted its focus to the industry and product level, leaving the national-level competitiveness question somewhat behind. Recently, many have turned their attention to the question of how countries, governments, and even private industry can alter the condition within a country to aid the competitiveness of its firms.

The leader in this area of research has been Michael Porter of Harvard. As he states:

National prosperity is created not inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s values, as classical economics insists.

A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade. Companies gain advantage against the world’s best competitors because of pressure and challenge. They benefit from having strong domestic rivals, aggressive home-based suppliers, and demanding local customers.

In a world of increasingly global competition, nations have become more, not less, important. As the basis of competition has shifted more and more to the creation and assimilation of knowledge, the role of the nation has grown. Competitive advantage is created and sustained through a highly localized process. Differences in national values, culture, economic structures, institutions, and histories all contribute to competitive success. There are striking differences in the patterns of competitiveness in every country; no nation can or will be competitive in every or even most industries.

Ultimately, nations succeed in particular industries because their home environment is most forward-looking, dynamic, and challenging.

Porter argued that innovation is what drives and sustains competitiveness. A firm must avail itself of all dimensions of competition, which he categorized into four major components of “the diamond of national advantage”:

  1. Factor conditions: The appropriateness of the nation’s factors of production to compete successfully in a specific industry. Porter notes that although these factor conditions are very important in the determination of trade, they are not the only source of competitiveness as suggested by the classical, or factor proportions, theories of trade. Most importantly for Porter, it is the ability of a nation to continually create, upgrade, and deploy its factors (such as skilled labor) that is important, not the initial endowment.
  2. Demand conditions: The degree of health and competition the firm must face in its original home market. Firms that can survive and flourish in highly competitive and demanding local markets are much more likely to gain the competitive edge. Porter notes that it is the character of the market, not its size, that is paramount in promoting the continual competitiveness of the firm. And Porter translates character as demanding customers.
  3. Related and supporting industries: The competitiveness of all related industries and suppliers to the firm. A firm that is operating within a mass of related firms and industries gains and maintains advantages through close working relationships, proximity to suppliers, and timeliness of product and information flows. The constant and close interaction is successful if it occurs not only in terms of physical proximity but also through the willingness of firms to work at it.
  4. Firm strategy, structure, and rivalry: The conditions in the home-nation that either hinder or aid in the firm’s creation and sustaining of international competitiveness. Porter notes that no one managerial, ownership, or operational strategy is universally appropriate. It depends on the fit and flexibility of what works for that industry in that country at that time.

These four points, as illustrated in Figure 3.5, constitute what nations and firms must strive to “create and sustain through a highly localized process” to ensure their success.

Porter’s emphasis on innovation as the source of competitiveness reflects an increased focus on the industry and product that we have seen in the past three decades. The acknowledgment that the nation is “more, not less, important” is to many eyes a welcome return to a positive role for government and even national-level private industry in encouraging international competitiveness. Including factor conditions as a cost component, demand conditions as a motivator of firm actions, and competitiveness all combine to include the elements of classical, factor proportions, product cycle, and imperfect competition theories in a pragmatic approach to the challenges that the global markets of the twenty-first century present to the firms of today.

The local brand representative in reseller networks | Journal of Business Research | Part 3: Research Methodology

  • This paper was published in the Journal of Business Research. Full article can be found at here.

Professor Suraksha Gupta, University of Kent

Professor Naresh K Malhotra, Georgia Institute of Technology

Professor Michael Czinkota, Georgetown University

Professor Pantea Foroudi, Middlesex University

ISSN 0148-2963

Drawing on the theory of rational choice, this paper proposes that the characteristics that attract resellers are leadership qualities, entrepreneurial nature, advisory skills, compatible attitude and charming personality. Also, this paper will identify those characteristics of a local brand representative, which influence resellers’ brand preferences and ultimately build reseller brand loyalty. Additionally, the current study contributes to the existing literature on industrial branding which describes the management of reseller networks.

 

 

The local brand representative in reseller networks | Journal of Business Research | Part 2: Research Objectives

  • This paper was published in the Journal of Business Research. Full article can be found at here.

 

Professor Suraksha Gupta, University of Kent

Professor Naresh K Malhotra, Georgia Institute of Technology

Professor Michael Czinkota, Georgetown University

Professor Pantea Foroudi, Middlesex University

ISSN 0148-2963

In order to precisely identify the characteristics of local brand representatives who can drive reseller brand preference, a scale was developed and empirically tested by the researchers using structure equation modeling techniques and fuzzyset qualitative comparative analysis (fsQCA) (Ragin, 2006 and 2008). fsQCA helps the researchers to gain a rich perspective on the data when applied together with complexity theory (Leischnig and Kasper-Brauer, 2015; Leischnig & Kasper-Brauer, 2015; Mikalef et al., 2015; Ordanini et al., 2013; Pappas et al., 2015; Woodside, 2014; Wu et al., 2014).

 

 

The local brand representative in reseller networks | Journal of Business Research | Part 1: Context

  • This paper was published in the Journal of Business Research. Full article can be found at here.

Professor Suraksha Gupta, University of Kent

Professor Naresh K Malhotra, Georgia Institute of Technology

Professor Michael Czinkota, Georgetown University

Professor Pantea Foroudi, Middlesex University

ISSN 0148-2963

To gain competitive advantage, brands are increasingly becoming concerned with their relationships with resellers and are employing local representatives. Interactions between local individuals who represent the firm behind the brand and the reseller firm provide opportunities for highlighting commercial aspects of the brand, such as product pricing, product differentiation and brand experience, to the reseller (Gummesson, 1994). Local individuals representing brands use opportunities to promote the brand by building trust in the brand-reseller relationship (Liberman and Montgomery, 1988; Morgan and Hunt, 2002; Christine, 2005).

 

This practice has been regularly employed by brands in IT (Intel, HP, Microsoft), telecom (Samsung, Benq, Sony Ericsson) and pharma (Pfizer, Ranbaxy) that tend to push their products through large networks of resellers, retailers and pharmacists. Such local individuals representing firms have been termed brand ambassadors by Debling et al. (2002) and Gromark and Melin (2011) whereas they have been termed relationship promoters by authors such as Palmatier et al. (2007a) and Walter and Gemunden (2000). This study investigates the characteristics of local individuals who represent a brand to its resellers. It does this by first conceptualizing these characteristics by employing complexity theory and then testing the conceptualization. The result is a scale of characteristics that can be used as an employee profile.

 

 

Marketing innovation: A consequence of competitiveness | Journal of Business Research | Part 3: Research Methodology

 

Professor Suraksha Gupta, University of Kent

Professor Naresh K Malhotra, Georgia Institute of Technology

Professor Michael Czinkota, Georgetown University

Professor Pantea Foroudi, Middlesex University

ISSN 0148-2963

This study addresses this question in four phases. The first phase underpins the arguments about competitiveness and marketing innovation with the current academic knowledge about theory of competitive advantage and resource-advantage theory. The second phase explores the concept and assumptions using expert insights. During the third phase, this study conducts a field survey to collect data from resellers of international brands and use structure equation modelling (SEM) and fuzzyset qualitative comparative analysis (fsQCA) (Ragin, 2006 and 2008). fsQCA has received increased attention as it gives an opportunity to the researchers to gain a deeper and richer perspective on the data, particularly when applied together with complexity theory (Leischnig and Kasper-Brauer, 2015; Mikalef, Pateli, Batenburg and Wetering, 2015; Ordanini et al., 2013; Woodside, 2014; Wu et al., 2014). The fourth phase leads to interpret the results in order to make recommendations and consider future avenues for the research. This research contributes to the literature on business-to-business and international marketing. Finally, the study advances the current understanding about the interdependence of brand and reseller firms for developing their competitiveness and adopting innovative approaches to marketing.