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Business Administration QUESTION #9598
Question 1
A multinational company evaluates entering a new country market using Porter's Diamond of National Competitive Advantage. The country has excellent engineering universities, low labour costs, but poor infrastructure and a fragmented domestic market. How should this analysis inform the entry strategy?
  • The poor infrastructure disqualifies the market — factor conditions alone cannot sustain competitive advantage without supporting industry clusters
  • The country's factor conditions (skilled engineers, low labour costs) favour vertical FDI in R&D and manufacturing, but the weak demand conditions and infrastructure suggest the multinational must invest in supply chain development and potentially co-invest with government in infrastructure to realize the factor advantage✔️
  • The fragmented domestic market indicates high demand uncertainty — the company should enter via licensing to minimize capital exposure
  • The country profile fits a resource-seeking FDI strategy — the multinational should extract the factor advantages without investing in local demand or infrastructure development
Correct Answer Explanation
Porter's Diamond requires four reinforcing conditions: factor conditions, demand conditions, related/supporting industries, and firm strategy/rivalry. This country has strong factor conditions but weak demand conditions and infrastructure (related industries). A sophisticated market-entry analysis would recognize that factor advantages are exploitable but require complementary investments to be sustainable — pure resource extraction without local market development fails to build the durable competitive advantage Porter's framework describes.