competative advantege theory

David Ricardo, in 1817, enunciated hisrefinement ofSmith'sconcept bypostulating theprinciple ofcomparativeadvantage

"... the principle of comparative

advantage: a nation, like a person,

gains from the trade by exporting

the goods or services in which it has

its greatest comparative advantage

in productivity and importing those

in which it has the least

comparative advantage."

It states that a country will exportgoods that use itsabundant factorsintensively, andimport goods that useits scarce factorsintensively.

( The Diamond – Four Determinants of National Competitive Advantage)

a model that can help understand the comparative position of a nation in global competition.

1. Land

2. Location

3. Natural resources (minerals, energy)

4. Labor, and

5. Local population size.

groups of interconnected firms, suppliers, related industries, and institutions, that arise in certain locations

Factor conditions

Demand conditions

Related and supporting industries, and firm strategy

Structure and Rivalry

Four attributes of a nation comprise Porter’s Diamond of national advantage:

THE DIAMOND AS A SYSTEM

-the effect of one point depends on the others.

-it is a self-reinforcing system.

Thank you for attention!