Government and Demand Conditions

Government and Demand Conditions

Factor conditions are human resources, physical resources, knowledge resources, capital resources and infrastructure. Specialized resources are often specific for an industry and important for its competitiveness. Specific resources can be created to compensate for factor disadvantages. Demand conditions in the home market can help companies create a competitive advantage, when sophisticated home market buyers pressure firms to innovate faster and to create more advanced products than those of competitors.

Related and supporting industries can produce inputs which re important for innovation and internationalization. These industries provide cost- effective inputs, but they also participate in the upgrading process, thus stimulating other companies in the chain to innovate. [2] Firm strategy, structure and rivalry constitute the fourth determinant of competitiveness. The way in which companies are created, set goals and are managed is important for success.

But the presence of intense rivalry in the home base is also important; it creates pressure to innovate in order to upgrade competitiveness. Government can influence each of the above four eterminants of competitiveness. Clearly government can influence the supply conditions of key production factors, demand conditions in the home market, and competition between firms. Government interventions can occur at local, regional, national or supranational level. Chance events are occurrences that are outside of control of a firm.

They are important because they create discontinuities in which some gain competitive positions and some lose. The Porter thesis is that these factors interact with each other to create conditions where innovation and improved ompetitiveness occurs To what extent can Porter’s diamond help explain the choice of Taiwan as a major manufacturing site for Logitech? Porter’s diamond considers four important attributes which will create an environment that helps the domestic industries.

The four attributes can be applied to Taiwan becoming a manufacturing hub for electronics goods as shown below: Factor Endowments: Taiwan has well qualified people for manufacturing electronic goods. It has good infrastructure and transport facility. Demand conditions: There is demand throughout the world for electronic products produced in Taiwan. All major global companies source their electronic component s from Taiwan.

Relating and supporting industries: Taiwan has a well-developed supply base for parts and rapidly expanding local computer industry. Firm strategy, structure and rivalry: There are tough competition and rivalry among local companies which help in better efficiency. Government role: The government has created Science-based industrial parks through which they encourage companies to invest in Taiwan. Land is given at very subsidized rates in these parks. Government and Demand Conditions By weipanying