Porter Diamond Model For Kuwait's Automobile Industry: Essay On FDI Attraction And Retention.

The fundamental of competition has shifted significantly to the creation and assimilation of knowledge hence, role of the nation has grown.

Required:

1. Assuming you are strategy and policy expert for your country, you are required to apply Diamond of National Advantage and critically discuss how your country can attract and retain Foreign Direct Investments (FDI). 

2. As a policy and strategy advisor in your country, critically discuss four basic policies that government should adopt to enhance the capacity of its industries to innovate and upgrade. (500 words) Marks-40

Foreign Direct Investment in Kuwait's Automobile Industry

The automobile industry is one of the leading and growing brands in today’s globalization world. Kuwait is a most effective and dynamic importer of New American automobiles and is the eighth biggest U.S export market for automobiles globally. The paper discusses how Kuwait uses porter diamond model to attract and retain foreign direct investment in the country.

With U.S automobile exports to Kuwait valued at $716 million in 2017, this is the biggest sector for U.S exporters in the consumer market. Every year Kuwait imports an average of 100,000 new vehicles (Export, 2018). Kuwait is an effective and excellent market for high end luxury and vintage automobiles. Kuwait is a dynamic market for large sized SUVs with heavy duty shock absorbers, cooling, transmission, tires and air conditioning systems that meet extreme temperatures. Luxury automobile manufacturers would also find Kuwait to be an effective and excellent market. Render Kuwait’s leading and innovative position in supply chain and logistics services to Afghanistan and Iraq. It is evident that the companies can get ample of benefits while implementing and initiating the business activities and operations in Kuwait. There are strategic benefits and cost benefits in doing business in the country. Kuwait organizations often display an international outlook and a willingness to invest long-term in viable goods and services. The country has further become the place for expansion and development of new products, services, and concepts. There are various companies that invest money in foreign countries to attain competitive benefits globally ( Dögl and Holtbrügge, 2010).

Foreign direct investment is an investment in the form of a monitoring and controlling ownership in a business in one country by a company based in another country. It is distinguished from a significant foreign portfolio investment by a notion of direct control. Apart from this, globalization puts a direct impact on the various organizations thus, foreign direct investment is becoming essential for each and every company to survive and grow the business functions internationally. FDI is further used to stimulate the target country’s economic expansion, development, creating a more favorable working environment along with this; it also provides various benefits to the local industry and investors. Moreover, foreign direct investment also creates new employment, as investors develop and improves new companies towards the country to generate new opportunities. This leads to a maximum in income and more purchasing power to the people, which in turn leads to an economic boost. It is recommended that the companies should focus on the foreign direct investment to grab the entire target market and to boost profitability in the competitive market. By attracting and retaining foreign direct investment, the companies can take tax benefits and they increase and enhance the revenue and returns in the international market (Balkyte and Tvaronavi?iene, 2010). The government can focus on the strategy formulation elements that are conducive and effective for attracting and retaining foreign direct investment. In order to attain this goal, the government may engage in several marketing activities and operations to take benefits of foreign direct investment in Kuwait as a means of initiating various pressure levels. Finally, meetings of the managers and investment companies could facilitate the involvement of a third actor. The unique and effective investment climate is generated by the countries for attracting and retaining the FDI. Reforms and policies play a significant and unique role in this regard (Balkyte and Tvaronavi?iene, 2010).

Porter Diamond Model

Porter diamond model: This model is significant and effective to understand and analyze the competitive position in the global market. It is noted that the porter diamond model renders an analytical structure and tool with multi measurements for industry and national competitiveness (Zhang & London, 2013). The porter diamond model for the Kuwait automobile industry has been drawn below.

Factor conditions: It shall be noted that the factor of manufacturing or production includes the natural resources, technology, and labor. The automobile industry uses a strong and skilled workforce to conduct business activities and functions successfully in Kuwait. Apart from this, effective research and development team and advanced technology will further help the companies to compete with rivals in the competitive market (Smit,  2010). Moreover, the country possesses a strong and dynamic transport structure in the country to earn more revenue and returns globally. With skilled and talented workforce, research and technology, the country has been able to attain competitive advantages in the international market.  The main motive behind this is to attract and retain major organizations for making an investment in the country. It will help in increasing and improving FDI in the nation ( Harding, 2017).

Demand condition: Demand condition refers to the size and nature of the local demand for an industry’s goods and services. It is investigated that high demand and needs for consumer electrics from the nation and internationally as well (Berger, 2008). The demand condition helps in taking innovative and effective decisions to contribute to the success and growth of the automobile industry. If the demand and needs of the automobile product is high and strong in the local market then it can help to attract the majority of customers in the international market. Kuwait has been able to attract maximum companies to invest in the country due to a strong infrastructure and economy (Zhao, Zhang & Zuo, 2011).

Firm structure, strategy, and rivalry: It is stated that distribution and promotional activities are performed by smaller retailers in the country. In addition, the country maintains a strong and dynamic structure to attract and retain maximum foreign companies for making an investment in such a country. The automobile companies are growing and increasing in the country thus, it helps to attract maximum customers in the global market (Ozgen, 2011).  

Related and supporting industries: It is studied that strong, advanced and effective R&D is significant and fundamental to automobile and electronics industry in Kuwait. It is measured that local supporting industries are more effective and competitive, thus the companies enjoy more cost-effective and innovative inputs.

In this way, it is evaluated that the porter diamond model helps in struggling and striving with rivals at the international level. By implementing this model, the automobile industry can take various advantages or benefits in the foreign market. By implementing or initiating the Porter diamond model a company may identify and evaluate what elements can build benefits at a national level. The policies, strategies, and products can be identified and measured through this strategy (Porter, 2008).

The four policies that help in reducing and enhancing the capacity of the automobile industry are discussed below.

• It shall be portrayed that the government should focus on the policy network approach to create a dynamic and strong image in the minds of the customers across the globe. Policy network approach assumes and states that resources, strategies, approaches, objectives, and values of actors in a specific policy process and approach are highly differentiated. However, since they exchange a specific policy approach they construct innovative and open relationship by exchanging own technology and resources to one another. The policy network approach is a framework that can be used by the government and other authorities to capture and grow relations amongst the actor in a specific policy process. By implementing this approach, the government can improve and boost the efficiency and capacity of the automobile industry in the international market (O'connor, 2017).
• It has been investigated from the various studies that Kuwait has become an economic power state thus the automobile industry can take ample of advantages with the help of stable economic conditions. The automobile industry has changed the culture and lifestyle of the Kuwait tremendously, rendering both the transportation medium and as a means of communication. Thus, the government should make policies and strategies to analyze and measure the choices, needs and requirements of the customers in the global market to promote FDI in the country. It will further help to stand over the competitors globally. The government should generate new ideas, strategies, and policies to take ample of growth opportunities globally. Optimum utilization of resources shall be done to create a strong and financial position in the global market (O'connor, 2017).
• An overwhelming study is conducted that shows that the Kuwait government should focus on the research and development team in order to boost and promote FDI in the country. Changes in infrastructure shall be done by the company to increase the sale of automobile products and enhance the FDI capacity in the international market. Training and development sessions and programs shall be held by the government to improve and enhance the skills, potential, and capacity of the workers internationally. The skilled and innovative team helps the company to serve better products and services to the customers across the globe (O'connor, 2017).
• It is measured that the Kuwait government should use advanced technology and resources to build a strong image in the international market. Innovative technology helps the automobile industry to distinguish its products from the competitors. There are several rules, policies, and strategies that unclear and ineffective which may put a direct impact on the performance, productivity and targets of the industry globally. It is suggested that if law, policies, and strategies are not clear then the industry cannot uplift profitability and outputs thus, the company needs to focus on the unclear rules, misconduct and misbehavior to overcome the competitors globally. All these policies will help the automobile industry in Kuwait to accomplish goals and enhance the efficiency and results of FDI (O'connor, 2017).

Conclusion 

It is noted that the porter diamond model plays a fundamental role in handling and gaining rival benefits in the global market. At the end, some innovative policies would be used by the country to stay in the rivals market globally.

References 

Balkyte, A. and Tvaronavi?iene, M., 2010. Perception of competitiveness in the context of sustainable development: facets of “sustainable competitiveness”. Journal of business economics and management, 11(2), pp.341-365.

Berger, T., 2008. Concepts of national competitiveness. Journal of international business and economy, 9(1), pp.91-111.

Dögl, C. and Holtbrügge, D., 2010. Competitive advantage of German renewable energy firms in Russia-An empirical study based on Porter's diamond. Journal for East European Management Studies, vol.7 (2). pp.34-58.

Harding, S., 2017. MBA management models. Routledge.

O'connor, J., 2017. The fiscal crisis of the state. Routledge.

Ozgen, E., 2011. Porter's diamond model and opportunity recognition: a cognitive perspective. Academy of Entrepreneurship Journal, 17(2), p.61.

Porter, M.E., 2008. On competition. Harvard Business Press.

Sharp, E.B., Daley, D.M. and Lynch, M.S., 2011. Understanding local adoption and implementation of climate change mitigation policy. Urban Affairs Review, 47(3), pp.433-457.

Smit, A.J., 2010. The competitive advantage of nations: is Porter’s Diamond Framework a new theory that explains the international competitiveness of countries?. Southern African Business Review, 14(1).

Zhang, P., & London, K. (2013). Towards an internationalized sustainable industrial competitiveness model. Competitiveness Review: An International Business Journal, 23(2), 95-113.

Zhao, Z. Y., Zhang, S. Y., & Zuo, J. (2011). A critical analysis of the photovoltaic power industry in China–From diamond model to gear model. Renewable and Sustainable Energy Reviews, 15(9), 4963-4971.

Export.,(2018). Kuwait-Automobile and automotive parts [Online], Retrieved from https://www.export.gov/article?id=Kuwait-Automobile-and-Automotive-Parts