Achievements of Major National Business Systems - Report Example

Does Porters ‘Diamond’ Concept Convincingly Explain the Achievements of Major National Business Systems or Are There Weaknesses, Theoretically and Empirically, in His Arguments? Contents Contents 2 Introduction 3 Key questions 3 National Competitiveness 3 Ford Motors of USA 4 Lenovo of China 6 Missing dimensions in Porter 8 Role of the state 8 Factor and demand conditions 9 Conclusion 9 References 11 Introduction This piece of work deals with the application of Porter’s Diamond Model in explaining the performance of major national business systems. The business systems have been chosen so as to point to the multinational business entities have different business functions and operating in different industries in different countries. Ford Motors which is headquartered in USA is a multinational automobile company selected for this work and the other company is Lenovo, a multinational business in electronics industry that is headquartered in China. The explanation of these two international businesses with the help of Porter’s Diamond model indicates the influence of the factor and demand conditions on the business. The strategies undertaken by the business functions in order to meet the market rivalry and gain competitive advantage through the support of related industries have also been explained through the use of Porter’s Diamond Model. Key questions The question answered in this piece of work is, “How effectively can Porter’s Diamond Model explain the performance of multinational companies in several economies? Relate the aspect of competitive advantage achieved by the companies with respect to the national competitiveness through the applications of Porter’s Diamond Model”. National Competitiveness The Porters Diamond Model could be used to explain the achievements and weaknesses in the international business. The Porters Diamond Model as shown below has been applied for the two companies, namely Ford Motors and Lenovo. The Porter’s Diamond Model takes into account the various factors such as the form strategy, structure and rivalry in the industry. The factor and demand conditions, related and supporting industries for the two companies have been considered in order to analyse the national competitiveness of the two countries of origin of the two companies, namely USA for Ford Motors and China for Lenovo (Dunning, 1993, p.69). Ford Motors of USA The strategy of Ford Motors of USA has developed due to its core values and culture developed by the founder, Henry Ford and passed on through the hierarchies over the years. The strategy of the company has been to conduct its operations differently with respect to the operational practices in the industry. The innovative approaches developed by the company have led to the development of competencies of the company in order to meet the challenges due to rivalry in the markets (Ford Motor Company, 2014, p.1). Ford Motors has introduced the virtual assembly lines for its automobiles (Coade, 1997, p.57). The auto parts in the virtual assembly lines were replaceable that increased the acceptance of Ford cars in the global markets. The automobile company used the applications of computer-aided designs in automobiles and also focussed on the offerings of higher fuel efficiency, engine performance, strong built exteriors and fashionable interiors, etc. Ford Motors has been able to meet the rivalry by reserving the customers in the market prior to the moves initiated by its competitors (Doole and Lowe, 2005, p.95). Ford Motors follows the practice of taking advance booking amounts from their customers and then carry out the production of automobiles that has helped the company to control the cost of production and increase the profitability of the organization. Ford Motors of USA has been able to meet the demands of the local markets across the globe. The rise in the standard of living due to the economic reforms and the spread of globalization have created surge in demand for automobiles in the local economies (Hutt and Speh, 2012, p.38). Ford Motors has brought about changes from the economic and managerial perspectives in the business in order to tap the potential demands. The company has addressed the economic changes by considering the price mechanism that is different from market to market. The efficiency of the automobile has also been addressed to tap the potential demand (Jenster, Hayes and Smith, 2005, p.84). These factors such as reduction of technical failure, mechanical problems have been addressed that have allowed the company to increase the production levels of the automobiles in the world market which is in line with the global demand (Kotler, 2009, p.50). The operations of Ford Motors have been supported by the related industries in the local economic where the company has established its operations. The operations of Ford Motors have been influenced by the national economic factors and the support of the local industries and business environment. Ford Motors have centralized operations with the sales and distribution of its cars being carried out in different countries. The company has sold its cars with the help of franchisees in the local markets. The company has, however, gathered the databases of the customers in various markets of operation and handled these databases with the help of CRM or customer relationship management software (McLoughlin and Aaker, 2010, p.47). Ford Motors’ international business is influenced by the factor conditions in the economies where the company runs its business. In order to use the benefits of the national competitiveness, the human resources team of the company has been effective in acquiring, training and retaining the workers and employees as per the requirement of the company. Ford Motors has a global strategy in which the company undertakes necessary changes as per the infrastructure, government rules and regulations, statutory requirements, financing relationships, etc. Ford Motors Company has offered attractive employment benefits, retirement benefits along with other privileges to satisfy the factor demands (OaShaughnessy, 1995, p.78). Lenovo of China Lenovo is a multinational electronics business headquartered in China that is involved in the manufacturing and selling of electronic products, smart-phones and accessories, computer hardware, software in various markets across the world. Lenovo faces strong rivalry in the electronic industry in China with IBM establishing a strong presence in the Chinese and the global markets. In order to achieve competitive advantage in the electronics markets of China and all over the world, Lenovo has adopted the strategy of investing for the purpose of technical excellence for its products (Rogers, 2001, p.27). Lenovo has adopted the strategic policy of innovation and manufacturing of creative and unique electronics items that have been readily accepted by the customers (Lenovo, 2012, p.1). Lenovo has been able to achieve competitive advantage through its product offerings for which the company has achieved a sales volume of 1.6 billion dollars in the last year. The total sales volume of Lenovo accounted for 45% of the total sales revenues generated by the electronics industry across the world. The demand factors for Lenovo indicate that the company has huge opportunities to tap the potential of the domestic market as well as the overseas markets like India and others (Fitzroy and Herbert, 2007, p.109). China and India are two of the world’s biggest populations and, therefore, Lenovo could look to use the huge demand for the electronic products in these markets (Reuvid, 2012, p.92). Apart from the investments in the technical efficiency and the innovative features incorporated in the electronic items sold by Lenovo, the company has also undertaken researches in bring about modifications in the product features and price range as per the changing demand in the market. This has allowed Lenovo to attain competitive edge over the competitors like IBM, Hewlett Packard, Sony, etc. The business growth of Lenovo is supported by the market demand which exhibits the national competitive in the target market in terms of the rise in income level and living standard, favourable government laws and regulatory framework in the countries in which it operates (Chakravarty and Eliashberg, 2005, p.81). The economic and managerial effectiveness of the entity is evident from the influence of change management strategies and innovative design to produce creative electronic items that have led to the increase in customer base and market share (Navarro, 2006, p.35). The market share of the company increased by 1.8% in the last fiscal and thereby reached a total market share of over 30%. The national conditions have also allowed the company to enter into strategic alliance with multinational players in the industry and thereby create clusters in the economies of operation. The collaboration with IBM of USA and TCL of China are the related supports available to their business of electronic items. The related industries are equally competitive as Lenovo as they have helped the company to fulfil the target volume of sales and revenues (Chaston, 2004, p.45). The factor demands in the national boundaries of operation of Lenovo are also favourable for the growth of Lenovo’s business. The major factors required for the business of electronics and accessories undertaken by the company are the supply of raw materials, labour and land. All these factors are very cheap in Chinese domestic market (Abrams and Abrams, 2003, p.64). The government also has favourable policies to ensure that the factor conditions are available to the business at desirable cost so that the business ventures could grow to the international levels. Lenovo has taken advantage of the domestic infrastructure and regulatory framework to use the factor conditions to their advantage (Kozami, 2002, p.107). Missing dimensions in Porter The application of the late development theory has indicated the missing dimensions in the Porter’s model which has been found from the lack of historical evidences. The Porter’s diamond model does not take into consideration the social and the environmental factors involved in the business of Ford Motors of USA and Lenovo of China (Mazzucato and The Open University, 2002, p.90). Historical evidences show that competitiveness of the business of automobile, electronics, pharmaceutical, aerospace and other industries are influenced by the activities as a corporate citizen apart from their commercial activities (Idowu, 2011, p.60). The corporate responsibilities of Ford Motors and Lenovo have been crucial in the sustainability of their business that has not been explained through the Porters Diamond Model (Verweire and Berghe, 2004, p.81). Role of the state The role of the state in the various industries in different nations has influenced the business functions of various companies in the international platform. The multinational businesses like Ford Motors and Lenovo are influenced by the statutory and regulatory laws specific to the business functions and the industry in the markets of operation (Goold and Luchs, 1996, p.73). The applications of Porter’s Diamond Model downplayed the role of the state. Lenovo and Ford Motors have adopted economic and managerial changes through use of market oriented knowledge to operate and grow in existing legal framework in the respective markets (Hill and Jones, 2009, p.51). Factor and demand conditions The factor and demand conditions of the economies across the world have influenced the business functions and growth of the multinational companies. The factor and demand conditions are influenced by the role of the government in establishing favourable framework for business investments (Cunningham and Harney, 2012, p.34). The applications of Porter’s Diamond Model has shown that due to the prevailing national factors like availability of cheap labour, raw materials and land, availability of finance has led to the growth of the business of Lenovo and Ford Motors in the worldwide markets (Abraham, 2012, p.59). Conclusion The Porter’s Diamond Model has been convincing in explaining the performance of the two multinational companies from different countries and different industries, namely Ford Motors and Lenovo. The Porter’s Diamond Model has explained that these companies have adopted strategies for excellence, innovation and creativity in order to gain more acceptability and competitive advantage in the market. The rivalry in the market has been effectively met with the help of these strategies. The government has played a big role in the form of establishing suitable infrastructure, legal reforms to encourage the business investments in the local markets. Ford Motors and Lenovo have obtained the benefits of cheap labour, land and finance that have helped them to expand aggressively in international markets. The organizations have brought about strategic changes in through effective managerial decisions that have allowed these companies to tap the opportunity of increasing market demand. The operations of the companies have been supported by the related industries and online mode of business in the local markets. This shows that due to the effects of globalization and the growth of technological and economic conditions in the local markets, Lenovo and Ford Motors have been able to exploit the factors of national competitiveness and attain competitive advantage in long term. References Coade, N. 1997. Managing International Business. Stamford: Cengage Learning. Doole, I. and Lowe, R. 2005. Strategic Marketing: Decisions in Global Markets. Stamford: Cengage Learning. Dunning, J. 1993. Internationalizing Porters diamond. Management International Review. 2(1): 7-10. Hutt, M. D. and Speh, T. W. 2012. Business Marketing Management: B2b. Stamford: Cengage Learning. Jenster, P. V.,  Hayes, H. M. and Smith, D. E. 2005. Managing Business Marketing & Sales: An International Perspective. Copenhagen: Copenhagen Business School Press DK. Kotler, P. 2009. Marketing Management. 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