Chapter seven examined the four nations that were the “winners” in the immediate post-war period. Porter now looks at the three economies that emerged in the 1970s and 1980s to challenge them. In doing so, he attempts to understand “the reasons why these nations have moved from positions lagging behind more established trading powers to create competitive advantage against the world’s best rivals in advanced industries” (383). This sheds further light on the relationship between the determinants of national advantage.

The first nation Porter examines, and the most conspicuous success story, is Japan. The other major defeated power in World War II, Japan faced arguably even greater challenges than Germany. Its major cities, Tokyo, Hiroshima, and Nagasaki, were not merely damaged but obliterated. Also, it possessed even fewer raw materials than Germany and was far more geographically isolated. Nevertheless, by the 1970s Japan was one of the leading world economies. It possessed dominant world export shares in industries related to electronic products, heavy equipment, and transport. For example, Japan had over 80% of world exports in motorcycles and TV image and sound recorders and 60% in cameras by 1985. Among the reasons for this were selective factor disadvantages. Besides lacking almost any significant natural resources, Japan also suffered from dependence on foreign energy, logistical problems due to distance from other nations, and a chronic lack of space, which created high land prices.