The template does more than just demonstrate the Porter Diamond. It is a model that helps visualize the competitive advantages that groups, organizations, or nations possess based on their resources.
Supporting Industries The individual points on the diamond and the diamond as a whole affect four ingredients that lead to a national comparative advantage. The points of the diamond are described as follows.
Factor Conditions A country creates its own important factors such as skilled resources and technological base. The stock of factors at a given time is less important than the extent that they are upgraded and deployed.
Local disadvantages in factors of production force innovation.
Adverse conditions such as labor shortages or scarce raw materials force firms to develop new methods, and this innovation often leads to a national comparative advantage. Demand Conditions When the market for a particular product is larger locally than in foreign markets, the local firms devote more attention to that product than do foreign firms, leading to a competitive advantage when the local firms begin exporting the product.
A more demanding local market leads to national advantage. A strong, trend-setting local market helps local firms anticipate global trends. Related and Supporting Industries When local supporting industries are competitive, firms enjoy more cost effective and innovative inputs.
This effect is strengthened when the suppliers themselves are strong global competitors. Firm Strategy, Structure, and Rivalry Local conditions affect firm strategy.
For example, German companies tend to be hierarchical.
Italian companies tend to be smaller and are run more like extended families. While at a single point in time a firm prefers less rivalry, over the long run more local rivalry is better since it puts pressure on firms to innovate and improve.
In fact, high local rivalry results in less global rivalry. Local rivalry forces firms to move beyond basic advantages that the home country may enjoy, such as low factor costs. The Diamond as a System The effect of one point depends on the others.
For example, factor disadvantages will not lead firms to innovate unless there is sufficient rivalry. The diamond also is a self-reinforcing system. For example, a high level of rivalry often leads to the formation of unique specialized factors.
Encourage companies to raise their performance, for example by enforcing strict product standards. Stimulate early demand for advanced products. Focus on specialized factor creation. Stimulate local rivalry by limiting direct cooperation and enforcing antitrust regulations.
Application to the Japanese Fax Machine Industry The Japanese facsimile industry illustrates the diamond of national advantage. Japanese firms achieved dominance is this industry for the following reasons: Japan has a relatively high number of electrical engineers per capita.
The Japanese market was very demanding because of the written language. Large number of related and supporting industries with good technology, for example, good miniaturized components since there is less space in Japan. Domestic rivalry in the Japanese fax machine industry pushed innovation and resulted in rapid cost reductions.
Government support - NTT the state-owned telecom company changed its cumbersome approval requirements for each installation to a more general type approval. Recommended Reading Porter, Michael E. He then applies the diamond to examples in both manufacturing and service industries, and uses the value chain to explain the growing role of services.
The book concludes with implications on company strategy and national agendas.The Porter Diamond is visually represented by a diagram that resembles the four points of a diamond.
Porter’s Five Forces Analysis Rivalry: High The first force Michel Porter describes is the current Rivalry among existing companies. The coffee shop business is mainly framed in 2 mainstreams.
First group is the major players like Starbucks, Seattle 's Best. Sep 23, · 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 initiativeblog.coms: The National Diamond' is a tool for analyzing the organization's task environment.
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. Porters diamond model. Porter's diamond is a model used as part fo the strategic analysis stage of the strategic planning process..
Porter tried to answer the following questions: Why does a nation become the home base for successful international competitors in an industry?
diamond, hence the name. See Figure 1. The Diamond Event illustrating the Diamond features and their relationships. The relationship/vertices between features are based on analytic pivoting and how from any point on the Diamond, an analyst can possibly reach the other connected points (given data/visibility/etc.).