The Competitive Advantage Of Nations

This is Porter’s collective term for the main determinants of competitive success in a nation. The strength of the diamond, and the connections within it, determine the likelihood of firm success in an industry.

This term refers to the effects (that is, the costs or benefits) of an agent’s action beyond those that accrue to the agent themselves. For example, a firm polluting a local river in the process of production is a negative externality.

The factor inputs required for production are usually broken down into the categories of land, labor, and capital. They can also be either advanced, like skilled engineers, or basic, such as raw materials and unskilled labor.

A first mover is the first firm in a new industry or industry segment to create a substantial market share. For example, Coca-Cola was the first mover in the cola soft drink industry. First movers typically enjoy benefits such as brand loyalty and initial economies of scale.

Globalization is the process whereby goods and services, labor, and capital are increasingly free to move across and between national boundaries

The location for a firm’s most important activities and for its strategic headquarters is its home base. This does not necessarily include all elements of production but usually means the place where firm strategy is set and where the most advanced elements of research and production occur.

An infant industry is a new or developing industry in a nation—usually, though not always, a developing nation. This concept is used to justify protection of firms in an industry until they gain a foothold in international competition.

Macro-economics is the study of large-scale economic actors and phenomena. It typically involves national economies, governments, and variables such as growth, inflation, exchange rates, and unemployment.

Micro-economics is the study of small-scale economic actors and phenomena. This typically involves individual agents and firms and their production and purchasing decisions.

NIC is an acronym for newly industrialized country. NICs are developing countries that are growing faster than most and show signs of catching up to developed nations. Examples include Indonesia and South Korea.