advantage. In addition to the size of the demand (which can lead to economies
of scale), the quality of the demand is equally significant. For example, if con-
sumers in a company's own country are the most progressive and demanding
in the world, then it will have to do its very best to deliver product quality,
innovation and service. In this way, the company and/or the country gains a
competitive advantage on the world market.
Related and supporting industries
The third determinant, related and supporting industries, exercises a similar
type of influence. The presence of related and supporting industries which can
compete at international level will force a company to meet the same high
international standard.
Firm strategy, structure and rivalry
The fourth broad determinant of national competitive advantage is firm strat-
egy, structure and rivalry. The goals and strategies of firms can differ sharply
between nations. There are also huge differences in the way firms in the same
industry are organized in different countries, as we will see in the second part
of this book. According to Porter, a good match between these choices and the
sources of competitive advantage in a particular industry will result in
national competitive advantage. If for instance the computer industry
demands flexible, non-bureaucratic organizational structures, and firms in a
particular country tend to favour this kind of organizational structure, they
will – all other things being equal – have a good chance of succeeding in this
industry.
The important question then is: why do firms in particular countries
favour particular strategies and structures? The answer is that there are many
national characteristics that influence the ways in which firms are organized
and managed. According to Porter, some of the most important aspects are
attitudes towards authority, norms of interpersonal interaction,
labour–management relationships, social norms of individual or group
behaviour, and professional standards. Porter places special emphasis on
labour–management relationships because he believes they are central to
the ability of firms to improve and innovate. All these aspects in turn find
their basis in a nation’s educational system, its social and religious history,
its family structures, and many other often intangible but unique national
characteristics.
Finally, domestic rivalry is also a very important factor, in that companies
force one another to lower their prices, improve quality and introduce a con-
stant stream of innovations, all of which also benefits the international com-
petitive position of the country in which they operate.
22 International Human Resource Management