The role of national circumstances in competitive success

These principles of competitive strategy in global industries highlight the perspective we must take in isolating the role of the home nation in international competition. Different strategies are appropriate for different industries, because industry structure as well as the sources of competitive advantage are different. Within the same industry, firms can choose, and succeed with, different strategies if they are seeking different competitive advantages or targeting different industry segments.

Nations succeed where country circumstances support the pursuit of the proper strategy for a particular industry or segment. What works well in the country must lead to competitive advantage in the industry. Many national attributes affect the ease or difficulty of pursuing a particular strategy, from the norms of behavior that shape the way firms are managed to the availability of certain types of skilled personnel, the nature of home demand, and the goals of local investors.²⁵

Creating competitive advantage in sophisticated industries demands improvement and innovation-finding better ways to compete and exploiting them globally, and relentlessly upgrading the firm's products and processes. Nations succeed in industries if their national circumstances provide an environment that supports this sort of behavior. Creating advantage requires insight into new ways of competing and the willingness to take risks and to invest in implementing them. Nations succeed where the national environ-

ment uniquely enables firms to perceive new strategies for competing in an industry. Nations succeed where local circumstances provide an impetus for firms to pursue such strategies early and aggressively. Nations fail where firms do not receive the right signals, are not subject to the right pressures, and do not have the right capabilities.

Sustaining competitive advantage for very long demands that its sources be upgraded. Upgrading advantage demands more sophisticated technology, skills and methods, and sustained investment. Nations succeed in industries where the skills and resources necessary to modify strategies are present. Firms that rest on a static conception of advantage are eventually imitated, and they lose market position.

Sustaining advantage demands continual change which is uncomfortable and organizationally difficult. Nations succeed in industries where pressures are created that overcome inertia and promote ongoing improvement and innovation instead of an easy life. Nations fail in industries where firms stop the upgrading process.

Nations succeed in industries where their home base advantages are valuable in other nations, and where their innovations and improvements foreshadow international needs. Success in international competition demands that firms translate domestic positions into international positions. This allows advantages from the home base to be levered and reinforced by a global strategy. Nations succeed in industries where domestic firms are pushed (or encouraged) to compete globally. The search for the determinants of national competitive advantage in industries must isolate these circumstances.