Hi guys. Welcome back to Global Business Environment. This is module six, part five, in which we continue to ask the question, is today's world dominated by free trade, freer trade, or managed trade. And we've come to some conclusions to some degree that this world is not, clearly not completely free trade dominated. It is some mix of freer or managed trade. And when we say managed trade, we're talking about countries and economics actively trying to create competitive advantages and actively trying to support the development of those competitive advantages on the part of individuals and companies and other entities. And we introduced this framework, but we haven't talked about it, yet. We're going to go through it formally here, in a minute, using an example. What we were using it to talk about how countries and regions and cities compete for investment and trade dollars across the world. And we said that this is a very widely utilized model. I think if you actually mention this to someone who's in the, the profession or works in the government, they've probably heard of it, Porter's Diamond. One way I like to try to present this is to talk about specific industries and regions and their successes and what they're known for and what they're good at exporting. For example in Switzerland over hundreds of years, they've become very famous and successful at watchmaking. They have individuals who are very well trained and some type of system that makes Swiss watches some of the best in the world. And we're going to try to understand why that is with our model of framework that's Porter's Diamond. We also could say that French wine is famous across the world and they're very successful at, at producing this this wine and ex, exporting it, and it's demanded, highly demanded all around the world. Another example is Hollywood in the United States of America in the state of California. And so, I'm going to focus in on Hollywood for a minute, but you might agree that Hollywood is one area in the world that is a center for the creative arts. They're known for movie making, for example, and other related music and television show development in that area of the world. And you might ask yourself why is that Hollywood is this capital of media creation. Is there something special about the soil or the dirt in Hollywood? Or is there something special in the air that has allowed Hollywood to become this very successful place that has a competitive advantage and very successful at exporting its product all around the world. Well, if we look back at at Porter's Diamond, we can see that, in fact, there are some very obvious reasons for Hollywood's success at developing this competitive advantage, or competitor advantage, and it's success in exporting. Let's look at those one by one. And what we're trying to understand, once again, is how countries manage trade. Because once you develop a successful center or cluster, they call it in in their lingo, a cluster of success, then the economy is built on that and you try to grow the cluster and you can import other products but you build your economy and develop your jobs and try to grow your gross domestic product based on this diamond. And so, let's start out with factor conditions. We we know that southern California in the United States is a beautiful place. It's on the coast. It has a great climate it's not too hot, it's not too cold. And so, we might argue than when the creative media industry really took off with movies in the early part of the 1900s, that that climate and that attractive coastal location may have attracted actors and actresses and other professionals in the media field. But I think it went beyond that. Think about, for a minute, what it takes to make movies. Or what it took back then to make movies, as this cluster of media creation developed. One thing that southern California has that many other places don't have, because there are lots of places in the world that have a good climate and that have, are on the coast. In addition to having the ocean, southern California has a mountain region. It has a desert region. So, you can film a large, for diversity or variety, of films with a large variety of topographies in that type of region. And so, that's probably one reason, one factor condition. And when we say factor, we mean factors of production, which contributed to the rise of Hollywood. Now, you might argue that human capitalism is another factor and southern California at the time was a type of place that had a culture that was compared to the rest of the United States, that was more open more creative, and therefore probably did attract the type of people who are successful in the creative arts. And so, the human factor of human of, of production was probably very important in the development of this region. Perhaps individuals who were involved in entertainment industry in New York City in the United States, which also was a capital of the theater arts at the time. Perhaps one or two very influential individuals left New York City, attracted to the to these factor conditions in Los Angeles the southern California region of, of United States. And said, hey, this is a great place to make movies. And so, more and more people moved there, thereby improving this human factor part of factor conditions. So, you might say the same thing about any product or service. Perhaps French wine is successful because there's something about the, the temperature and the soil there in France, which contributes to great wine production. There's also this great tradition that's passed down through history through farmers, through families that allows for the successful wine industry to develop. And the same thing with watches in Switzerland. You might think of the apprentice and master relationship that develops over time, and the knowledge that's really located in that one region of the world and what didn't exist in other parts of the world. And so, you see that developing with a cluster, the factor conditions kind of grow on themselves, and you get the best actors and actresses and producers and directors living in one place and that's where everybody wants to go and so a cluster developed. And so, this is the first factor in Porter's Diamond, that contributes to how we see comparative and competitive advantage in trade flows emerging in today's modern world. We'll stop there, with this part and finish up module six. We'll have a part six and we'll discuss these other three parts of Porter's Diamond, in that part. Thank you very much.
