International-Business-Dr-R-Chandran-E-book

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International Business- Dr. R. Chandran
Italian producers located near the small town of Sassuolo accounted for 30%
of the total world production of ceramic tiles and 60% of their exports,
constituting an industry of US $ 10 billion.
Rebuilding and reconstruction activities after World War II led to a
strong demand for tiles, especially in Italy as they were well suited to the
climate and taste of the people. This led to the following steps:
1. A local pool of trained workers; engineers, designers, technician and
maintenance workers etc, was formed.
2. Companies producing kilns and presses were started to replace
imported items with local products. This was facilitated by the local
need to modify imported equipments.
3. Retail outlets and specialized showrooms were established throughout
Europe.
4. The Italian market was the most sophisticated due to familiarity with
the product. This led to demand for better products by the customers.
5. Intense rivalry was fueled by geographic proximity.
6. Disadvantages in labour costs led to continuous process, production
and automation.
7. Exports were facilitated by the existence of an industry association
that promoted the product abroad. Advertising by the individual
companies also promoted a positive image.
The same kind of competitiveness can be seen in the following countries
with respect to specific products:
1. Cut flowers – Netherlands
2. IT – India
3. Soft Toys and ceramics – China
4. Rubber products – Malaysia
5. Glasses – Malta
Implications for business
1. Locations Implications: One direct implication is that firms should
concentrate production in the country with the best diamond in the
industry. This seems to rule out geographic separation of assembly
and manufacture of parts, (the diamond works when these two
‘points’ are in same country). However, Porter acknowledges that a
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