After reading you will understand the basics of this powerful strategy and competitive advantage analysis tool. What is the Porter Diamond Model? The American strategy professor Michael Porter developed an economic diamond model for small-sized businesses to help them understand their competitive position in global markets. This Porter Diamond Model, also known as the Porter Diamond theory of National Advantage or Porters double diamond model, has been given this name because all factors that are important in global business competition resemble the points of a diamond.
Porter tried to answer the following questions: Why does a nation become the home base for successful international competitors in an industry? Germany is renowned for car manufacture; Japan is prominent in consumer electronics.
Why is one country often the home of so many of an industry's world leaders? Porter called the answers to these questions the determinants of national competitive advantage.
He suggested that there are four main factors which determine national competitive advantage and expressed them in the form of a diamond. Porter's Diamond Favourable factor conditions include the following: Porter also found that countries with factor disadvantages were forced to innovate to overcome these problems, e.
Japanese firms experienced high energy costs and were forced to develop energy efficient products and processes that were subsequently demanded worldwide. Demand Conditions There must be a strong home market demand for the product or service. This determines how industries perceive and respond to buyer needs and creates the pressure to innovate.
A compliant domestic market is a disadvantage because it does not force the industry to become innovative and excellent. Related and supporting industries The success of an industry can be due to its suppliers and related industries.
Sweden's global superiority in its pulp and paper industries is supported by a network of related industries including packaging, chemicals, wood-processing, conveyor systems and truck manufacture.
Many of these supporting industries have also achieved leading global positions. Firm strategy, structure and rivalry Organisational goals can be determined by ownership structure. Unquoted companies may have slightly longer time horizons to operate in because their financial performance is subject to much less scrutiny than quoted companies.
They may also have different 'return on capital' requirements. Porter found that domestic competition was vital as a spur to innovation and also enhanced global competitive advantage.
Conversely, where governments have encouraged mergers to get the critical mass required to be a global player, these national monopolies have not, on the whole, been successful in establishing a global position. Porter developed the model by looking at ten developed countries.
The model thus only really applies to developed economies. Porter argues that inbound FDI does not increase domestic competition significantly because domestic firms lack the capability to defend their own markets and face a process of market share erosion and decline.
However, there seems to be little empirical evidence to support that claim.
The Porter model does not adequately address the role of MNCs. There seems to be ample evidence that the diamond is influenced by factors outside the home country.
Some have questioned its relevance to service based companies such as McDonalds.International Marketing Porters Diamond • National advantage is the term used to refer to the factors that set each country apart, and determine the success and dominance of their businesses in a global market.
Porter’s Diamond Model: Porter’s Diamond Model can be used to assess the national competitive advantage of Indian automobile industry.
Factors of Production: Among the basic factors, low labor cost is one of the key characteristics of the . The National Diamond highlights that strategic choices should not only be a function of industry structure and a firm's resources, it should also be a function of the constraints of the institutional framework.
In this way, Porter‟s diamond model of national competitiveness was detected as a model with which to assess the sources of competitive advantages of an industry in a particular country and it can help realise the competitive status of a nation in global competition.
Porter's Diamond on Japan Porter's Theory of Competitive Advantage on Japan Michael Porter's theory of the competitive advantage of nations provides a sophisticated tool for analyzing competitiveness with all its implications. A Double Diamond Comparison of the Automotive Industry of China, India, and South Korea countries by using the Double Diamond Model which is based on Porter’s Diamond Model.
Our results show that the Chinese A Double Diamond Comparison of the Automotive Industry of China, India, and South Korea.