PORTER'S MODEL

International Business Essay

Word Count: 2,007

International Business Essays

Introduction

This essay provides a critical overview of contemporary issues related to international business and economics. It shed light on the changing role of organizations and governments, and provides us a framework to remain competitive in an environment which is known for its unpredictability and erratic behaviour.

In modern day business environment, the emerging socio-economic trends such as US driven free trade policies, globalization and computer mediated communication are strengthening individualism and democracy in contemporary society. These reforms are weakening the power of the government and allowing the individual to have freedom of expression, property and movement (Porter, 90, Pp 24-8).

Nowadays, individual investors and business organizations have more opportunities to involve in business activities freely on a global level as compare to their governments, which is causing the rise of capitalistic businesses, and becoming a crucial factor in the demise of centralized local economies. These reforms are creating a new business culture in which countries are losing their ability to compete effectively, and paving the way for capitalistic oriented investors and organizations to be become more prominent (Porter, 90, Pp 24-8).

“Companies, Not Countries Compete” (Porter's Model)

According to Porter, it is not the country, but companies that have more potential to compete in modern day business environment. The liberalization policies initiated in the 90's after the collapse of Soviet Union (which believed in centralized economy) resulted in the opening of national borders to global businesses. The newly initiate liberalization process paved way for the emergence of free trade agreements among countries for mutual economic benefits. In the contemporary world, it is the company which has more economic freedom as compare to the nation of its origin (Porter, 90, Pp 24-8).

As stated by him, successful local industries are those which are located in a specific geographical location or economic Zones. This geographical concentration provides them an opportunity to be interdependent by utilizing each other's expertise and experiences effectively and efficiently. It is a win-win situation for all of them since they share similar culture, supply capabilities and local infrastructure. These industry specific clusters allow them to remain connected with suppliers, interconnected business and support institutions (Porter, 90, Pp 24-8).

The concentration allows them to increase their collective productivity in terms of innovation and satisfying market demand and faster process of new business development. Porter states that organizational ability to become competent in the global environments depends on its ability to produce effectively and efficiently. The rise in productivity not only makes the organization more competent, but helps the population of a country to raise its standard of living. Geographic concentration of organizations can take diverse forms. For example, they might be offering different products, or are involved in the creation of similar products across value added chains. Examples would be the concentration of IT companies in Silicon Valley and Bangalore, the concentration of financial markets in New York, Paris and London, and clusters of International film industry in Hollywood and Bollywood, ...