Determining factors of national advantage

Porter introduced a model that allows analyzing why some nations are more competitive than others are, and why some industries within nations are more competitive than others. Determining factors of national advantage has become known as Porters Diamond. Four determinants are distinguishes below:-

1. Factor Conditions

Factors can be grouped into human resources like -skilled and qualified labor, labor cost, commitment etc., natural resources, knowledge resources, capital resources, and infrastructure. Porter points out that these factors are not necessarily nature-made or inherited. They may develop and change. Political initiatives, technological progress or socio-cultural changes, for instance, may shape national factor conditions.

To established the retail industry in UK almost the same factor conditions work for ASDA and TESCO. Both have skilled workforce and sophisticated infrastructure, skilled human resources or a scientific base, speed of creation, speed of upgrade, and degree of specialisation in retail industry.

(http://www.themanager.org/Models/diamond.htm, accessed: 22nd Feb, 2010

2. Related And Supporting Industries

A set of strong related and supporting industries is important to the international competitiveness of firms. This includes supplier and related industries. If local supporting industries are competitive, firms enjoy more effective and innovative inputs. Internationally competitive home-based suppliers create advantage in downstream industries through superior inputs, co-ordination in the value chain and innovation and upgrading.

The competitiveness of retail industry is benefit from the local industries, local producers and local farmers. ASDA and TESCO are both selling almost similar items like Grocery, Fresh, Wine, Clothing, Phone accessory, Electronic goods. We can see both retail company-ASDA and TESCO has a good supply chain with their local Industries, local Producers, local Farmers and foreign suppliers.

3. Firm Strategy, Structure, and Rivalry

The context of characteristics of firm strategy, structure and rivalry in different countries also helps explain bases of advantage. The conditions in nation governing how companies are created, organized, and managed, as well as the nature of domestic rivalry.

TESCO implement a clear cost leadership strategy, as market leaders they benefit heavily from economies of scale. The introduction of their own brand allowed the company to cut their costs and increase their profit margins. Tosco’s current strategy is very much one of growth. Depend on the feature aimed at the high street consumer TESCO offering different categories shop and services-

In Tesco’s Extra stores here are over 15,000 of their own brand products. Customer can buy any product in cheaper price. Tesco Extra stores, selling not just food, like other supermarkets.

“Tesco Metro” was introduced. This was a feature aimed at the high street consumer while offering the benefits of a large supermarket.

“Tesco Express” in essence a petrol station with a small Tesco store onsite. This offered customer convinces products i.e. bread, milk and essential grocery items.

Tesco Direct – The recent interim results show how Tesco’s non-food products have made good progress. Tesco’s Direct will offer the vast range to anyone with computer access.

Telecommunications – Tesco launched an ISP service back in 1998, but have invested more heavily in this field since 2003. Tesco’s mobile is in an association with O2 and their ADSL package with NTL.

Personal Finance – Tesco Personal Finance displays to the extent the corporation is diversifying, now moving outside the retail sector.

(http://www.tesco.com, accessed: 22nd Feb. 2010)

When we look at the ASDA‘s main strategy is bit same as TESCO-is the ability to keep costs low and pass that on to customers in lower prices. All the ASDA stores have largely accommodated similar with TESCO EXTRA, have the ASDA Direct, George for clothing, Groceries and Financial services. But ASDA don’t have the store like Tesco metro or Tesco Expess where Tesco’s current strategy is very much one of growth.

UK’s retail industry such Sainsbury’s, Marks & Spencer, Morrisons, Waitrose and so on are the good example of domestic rivalry of Tesco and Asda.

4. Demand Conditions:

The shaping of particular factor conditions is influence by demand condition. Porter state that home demand is determined by three major characteristics-the mix of customer’s needs and wants, their capacity and expansion rate, and the mechanisms that send out domestic preferences to foreign markets.

He also states that if home demand provides clearer and earlier signals of demand trends to domestic suppliers than to foreign competitors ,a country can achieve national advantages in an industry or market segment,

Enormous demand and high quality desires in retail industry in UK in resulted TESCO and ASDA to produce high quality products.

Reference:

Michael Porter,The Competitive Advantage of Nations, 1990.

Prentice Hall, Exploring Corporate Strategy, 7th edition.

http://www.asda.co.uk

http://www.tesco.com

http://www.themanager.org/models/diamond.htm