The Competitive Advantage Of Nations

“In the modern global economy, prosperity is a nation’s choice.”

Porter outlines what is at stake in his discussion. By understanding the true determinants of national advantage, a nation can make the correct policy choices regarding competitiveness. In the modern, globalized economy, this can lead to national prosperity.

“Competitive advantage that rests on factor costs is vulnerable to even lower factor costs somewhere else.”

Porter provides a reason why relying on factor costs, such as cheap labor, is a bad strategy for a nation. This is because low factor costs are easily replicable elsewhere. They are also vulnerable to being undercut. A better, and more sustainable, strategy is for a nation to create high-quality of products.

“The reason so few firms sustain their position is that change is extraordinarily painful and difficult for any successful organization.”

In this passage, Porter explains why firms are so slow to continue the upgrading and innovating process once they have become successful. Doing so involves restructuring and disturbing the established, comfortable ways of doing things. Unfortunately, this means that such firms are likely to be overtaken by firms with less of an investment in the old order.