Switzerland has been a poor nation as late as the nineteenth century. Its major exports were mercenaries and emigrating citizens (Porter 1998, 307). In the early decades of the 20th century, Switzerland has emerged as an industrial nation of importance. Because Switzerland avoided destruction during World War II the country was an early winner. The circumstances made them well positioned to prosper in early post war periods. By the 1960′s, using some measures, Swiss per capita income was the highest in the world (Porter 1998, 307). Industrial success was enough to more than employ all available Swiss citizens at high wages. Total unemployment was in the 60ies 0.0% (Porter 1998, 281) Swiss companies like Nestlé, Novartis, UBS, Roche, Schindler, Swatch Group or Lindt and Sprüngli, are global operating. The leading Swiss multinationals employ far more people outside the country than in Switzerland (Porter 1998, 307). Switzerland is an example how a small nation without a large home market can be a successful global competitor.
At the moment Switzerland is still a prosperous country but it lost economic wealth. During the 1990ies Switzerland had the lowest growth rates compared to all OECD member states. This working paper tries to answer the question if Switzerland lost competitive advantage, and if the low growth rates are a result out of this. In the first part of the text Porters theory of national advantage is explained the second part reflects the state of the Swiss economy in the late 1980ies and the third part analyzes what has happened in Switzerland from 1990 to 2000.
Table of Contents
- Introduction
- Determinants of National Advantage
- Factor Conditions
- Demand Conditions
- Related and Supporting Industries
- Firm Strategy, Structure and Rivalry
- Patterns of Swiss Competitive Advantage in 1985
- Clusters of Internationally competitive industries in 1985
- Factor Conditions
- Demand Conditions
- Related and supporting industries
- Firm Strategy, Structure and Rivalry
- Switzerland during the 1990ies
- Factor Conditions
- Demand conditions
- Related and supporting industries
- Firm Strategy Structure and Rivalry
- Enhancement of Porters Model
- Change
- Switzerland a Wealth driven economy?
Objectives and Key Themes
This working paper aims to investigate whether Switzerland experienced a loss of competitive advantage during the 1990s compared to other EU and OECD member states, and if this loss contributed to the country's low economic growth rates during that decade. The study utilizes Porter's theory of national competitive advantage as a framework for analysis.
- Porter's Diamond Model and its application to the Swiss economy.
- Analysis of Switzerland's competitive advantages in the late 1980s.
- Examination of changes in the Swiss economy from 1990 to 2000.
- Assessment of Switzerland's factor conditions, demand conditions, related and supporting industries, and firm strategy and rivalry.
- Evaluation of whether Switzerland's low growth rates are linked to a loss of competitive advantage.
Chapter Summaries
Introduction: This chapter introduces the context of Switzerland's economic development, highlighting its transformation from a poor nation in the 19th century to a globally competitive economy in the mid-20th century. It emphasizes the country's remarkable post-war economic success, driven by successful industries and multinational corporations. However, it also notes a decline in economic growth during the 1990s, raising the central question of whether this decline stemmed from a loss of competitive advantage. The paper outlines its methodology: explaining Porter's theory, assessing the Swiss economy in the late 1980s, and analyzing the changes that occurred between 1990 and 2000.
Determinants of National Advantage: This chapter details Porter's diamond model, a framework for understanding national competitive advantage. It breaks down the four key determinants: factor conditions (resources and infrastructure); demand conditions (local market size and sophistication); related and supporting industries (presence of strong local suppliers); and firm strategy, structure, and rivalry (domestic competition and business practices). This chapter lays the theoretical groundwork for the subsequent analysis of the Swiss economy, providing the lens through which the following chapters will examine the Swiss case.
Patterns of Swiss Competitive Advantage in 1985: This chapter focuses on identifying the clusters of internationally competitive industries in Switzerland in 1985, using Porter's framework. It highlights Switzerland's remarkable success in diverse sectors such as petroleum/chemicals, textiles/apparel, and most notably, health care. The analysis emphasizes Switzerland's specialization in high-value, sophisticated segments of these industries, particularly those intensive in marketing and service. This section establishes a baseline for comparison when assessing changes in the 1990s.
Switzerland during the 1990ies: This chapter delves into the economic performance of Switzerland during the 1990s. It examines the changes in factor conditions (location, taxes, R&D spending, savings rates), demand conditions (domestic demand strength), related and supporting industries, and firm strategy, structure, and rivalry. A critical aspect is the exploration of whether the observed changes in these determinants led to a weakening of Switzerland's competitive position, contributing to its relatively low growth compared to other OECD nations. The analysis directly applies Porter's diamond model to the observed changes within the Swiss economy.
Keywords
National competitive advantage, Switzerland, Porter's Diamond Model, economic growth, OECD, EU, factor conditions, demand conditions, related and supporting industries, firm strategy, structure, and rivalry, 1990s, international competitiveness, clusters of industries, health care, textiles.
Frequently Asked Questions: Analysis of Switzerland's Competitive Advantage
What is the main focus of this working paper?
This working paper investigates whether Switzerland experienced a loss of competitive advantage during the 1990s, contributing to its low economic growth rates during that decade. It uses Porter's theory of national competitive advantage as its analytical framework.
What are the key themes explored in the paper?
Key themes include the application of Porter's Diamond Model to the Swiss economy; analysis of Switzerland's competitive advantages in the late 1980s; examination of changes in the Swiss economy from 1990 to 2000; assessment of Switzerland's factor conditions, demand conditions, related and supporting industries, and firm strategy and rivalry; and evaluation of whether Switzerland's low growth rates are linked to a loss of competitive advantage.
What is Porter's Diamond Model, and how is it used in this paper?
Porter's Diamond Model is a framework for understanding national competitive advantage. It considers four determinants: factor conditions (resources and infrastructure); demand conditions (local market size and sophistication); related and supporting industries (strong local suppliers); and firm strategy, structure, and rivalry (domestic competition and business practices). The paper uses this model to analyze Switzerland's competitive advantage in the 1980s and its changes in the 1990s.
What were Switzerland's competitive advantages in 1985?
In 1985, Switzerland showed remarkable success in various sectors, including petroleum/chemicals, textiles/apparel, and particularly healthcare. Its specialization was in high-value, sophisticated segments, often marketing and service-intensive.
What changes occurred in the Swiss economy during the 1990s?
The paper examines changes in factor conditions (location, taxes, R&D, savings rates), demand conditions (domestic demand strength), related and supporting industries, and firm strategy, structure, and rivalry during the 1990s. It analyzes whether these changes weakened Switzerland's competitive position and contributed to its lower growth compared to other OECD nations.
What is the conclusion of the paper regarding Switzerland's economic performance in the 1990s?
The paper aims to determine if the observed changes in the determinants of national competitive advantage led to a loss of competitive advantage for Switzerland and whether this loss is connected to the country's relatively low economic growth during the 1990s. The detailed analysis using Porter's Diamond Model provides insights into this question.
What are the key words associated with this analysis?
Key words include: National competitive advantage, Switzerland, Porter's Diamond Model, economic growth, OECD, EU, factor conditions, demand conditions, related and supporting industries, firm strategy, structure, and rivalry, 1990s, international competitiveness, clusters of industries, health care, textiles.
What is the structure of the working paper?
The paper includes an introduction, a detailed explanation of Porter's Diamond Model, an analysis of Switzerland's competitive advantages in 1985, an examination of the Swiss economy in the 1990s, and a concluding discussion linking changes in competitive advantage to economic growth. Chapter summaries are provided to give a concise overview of each section.
- Quote paper
- Beat Flury (Author), 2002, National Competitive advantage of Switzerland, Munich, GRIN Verlag, https://www.grin.com/document/9603
