Saumyadeep Mazoomdar
INTRODUCTION
PORTERS
DIAMOND
MODEL
PORTERS
DIAMOND
EXPLANATION
Introduc)on
Developed
in
1990,
by
Michael
Factor
Endowment
Demand
conditions
Related/Support
industry,
Firm
Strategy
and
rivalry
the others.
PROs
Of
the
MODEL
PORTERs
CRITICISM
CASE Example
INTRODUCTION
PORTERS
DIAMOND
MODEL
PORTERS
DIAMOND
EXPLANATION
PROs
Of
the
MODEL
PORTERs
CRITICISM
CASE Example
Porters Analysis
The
approach
looks
at
clusters,
a
number
of
small
industries,
where
the
competitiveness
of
one
company
is
related
to
the
performance
of
other
companies
and
other
factors
tied
together
in
the
value-added
chain,
in
customer-client
relation,
or
in
a
local
or
regional
contexts.
Porter's
analysis
deals
with
the
dynamic
process
by
which
competitive
advantage
is
created..
The
basic
method
in
these
studies
is
historical
analysis.
The
phenomena
that
are
analyzed
are
classied
into
six
broad
factors
incorporated
into
the
Porter
diamond,
which
has
become
a
key
tool
for
the
analysis
of
competitiveness:
Demand
conditions
in
the
home
market
can
help
companies
create
a
competitive
advantage,
when
sophisticated
home
market
buyers
pressure
rms
to
innovate
faster
and
to
create
more
advanced
products
than
those
of
competitors.
Factor
conditions
are
human
resources,
physical
resources,
knowledge
resources,
capital
resources
and
infrastructure.
Specialized
resources
are
often
specic
for
an
industry
and
important
for
its
competitiveness.
Specic
resources
can
be
created
to
compensate
for
factor
disadvantages.
Related
and
supporting
industries
can
produce
inputs
that
are
important
for
innovation
and
internationalization.
These
industries
provide
cost-eective
inputs,
but
they
also
participate
in
the
upgrading
process,
thus
stimulating
other
companies
in
the
chain
to
innovate.
Firm
strategy,
structure
and
rivalry
constitute
the
fourth
determinant
of
competitiveness.
The
way
in
which
companies
are
created,
set
goals
and
are
managed
is
important
for
success.
But
the
presence
of
intense
rivalry
in
the
home
base
is
also
important;
it
creates
pressure
to
innovate
in
order
to
upgrade
competitiveness.
Government
can
inuence
each
of
the
above
four
determinants
of
competitiveness.
Clearly
government
can
inuence
the
supply
conditions
of
key
production
factors,
demand
conditions
in
the
home
market,
and
competition
between
rms.
Government
interventions
can
occur
at
local,
regional,
national
or
supranational
level.
Chance
events
are
occurrences
that
are
outside
of
control
of
a
rm.
They
are
important
because
they
create
discontinuities
in
which
some
gain
competitive
positions
and
some
lose
The
Porter
thesis
is
that
these
factors
interact
with
each
other
to
create
conditions
where
innovation
and
improved
competitiveness
occurs.
INTRODUCTION
PORTERS
DIAMOND
MODEL
PORTERS
DIAMOND
EXPLANATION
PROs
Of
the
MODEL
PORTERs
CRITICISM
CASE Example
INTRODUCTION
PORTERS
DIAMOND
MODEL
PORTERS
DIAMOND
EXPLANATION
PROs
Of
the
MODEL
PORTERs
CRITICISM
CASE Example
Demand
Condi)ons
A
more
demanding
local
market
important role
E.g.
1
Japans
knowledgeable
buyers
of
cameras
made
that
industry
to
innovate
and
grow
tremendously
E.g.
2
Local
demand
for
cellular
phones
in
scandinavia
made
nokia
and
ericson
to
invest
in
that
in
other
developing
nations.
E.g.
3
The
French
wine
industry.
The
French
are
sophisticated
wine
consumers.
These
consumers
force
and
help
French
wineries
to
produce
high
quality
wines.
attribution http://www.citehr.com/6865-michael-porters-diamond-theory-its-application.html#ixzz2sZVQxsQ9
INTRODUCTION
PORTERS
DIAMOND
MODEL
PORTERS
DIAMOND
EXPLANATION
PROs
Of
the
MODEL
PORTERs
CRITICISM
CASE Example
Factor
Condi)ons
BASIC
FACTORS
Natural
resources,
attribution http://www.citehr.com/6865-michael-porters-diamond-theory-its-application.html#ixzz2sZWFtAnX
INTRODUCTION
PORTERS
DIAMOND
MODEL
PORTERS
DIAMOND
EXPLANATION
PROs
Of
the
MODEL
PORTERs
CRITICISM
CASE Example
Related/Suppor)ng
Industries
Benets
of
investment
in
attribution http://www.citehr.com/6865-michael-porters-diamond-theory-its-application.html#ixzz2sZWFtAnX
INTRODUCTION
PORTERS
DIAMOND
MODEL
PORTERS
DIAMOND
EXPLANATION
PROs
Of
the
MODEL
PORTERs
CRITICISM
CASE Example
(Strategy)
is
a
determinant
of
success
improves
a
companys
competitiveness
local
conditions
aect
rm
strategy.
INTRODUCTION
PORTERS
DIAMOND
MODEL
PORTERS
DIAMOND
EXPLANATION
PROs
Of
the
MODEL
PORTERs
CRITICISM
CASE Example
Government
The
role
of
Government
in
this
model
is
to
Encourage
stimulate
help
to
create
growth
in
industries.
Government
Policies
Can
detract
from
or
improve
national
advantage
Regulation
can
alter
home
demand
conditions
Government investment in
GOVERNMENT is helping to
GOVERNMENT is providing
infrastructures
to
attract
more
industries
INTRODUCTION
PORTERS
DIAMOND
MODEL
PORTERS
DIAMOND
EXPLANATION
PROs
Of
the
MODEL
PORTERs
CRITICISM
CASE Example
Chance
Disruptive
developments
outside
innovations,
unexpected
oil
price
rises,
revolutions,
wars,
etc.
INTRODUCTION
PORTERS
DIAMOND
MODEL
PORTERS
DIAMOND
EXPLANATION
PROs
Of
the
MODEL
PORTERs
CRITICISM
CASE Example
Porters Diamond model explains why corporations domiciled in certain countries are successful
in
penetrating
foreign
markets.
This
model
can
be
used
to
assess
competitive
advantage
of
the
national
environment
in
which
individual
business
units,
organizations,
or
industries
operate.
The model helps to understand the dynamic interplay between a rms corporate strategy and
the
competitive
advantages
of
a
country
the
habitat
in
which
organizations
operate.
This
model
is
an
addition
to
Porters
ve
forces
model
dealing
with
industry
structure.
The
diamond
model
emphasizes
that
a
rm
should
only
internationalize
when
it
has
a
strong
position
in
its
home
market.
corporate
strategy.
Companies
should
form
strategic
alliances,
especially
with
organisations
in
related
and
supporting
industries.
The
model
explains
in
part
the
resource
curse
--
why
a
large
natural
resources
base
is
not
INTRODUCTION
PORTERS
DIAMOND
MODEL
PORTERS
DIAMOND
EXPLANATION
PROs
Of
the
MODEL
PORTERs
CRITICISM
CASE Example
Cri)cism
optimistic about the future of the Korean economy. He argues that Korea may well reach true
advanced
status
in
the
next
decade
(p.
383).
In
contrast,
Porter
is
less
optimistic
about
Singapore.
In
his
view,
Singapore
will
remain
a
factor-driven
economy
(p.
566)
which
reects
an
early
stage
of
economic
development.
Since
the
publication
of
Porter's
work,
however,
Singapore
has
been
more
successful
than
Korea.
This
dierence
in
performance
raises
important
questions
regarding
the
validity
of
Porter's
diamond
model
of
a
nation's
competitiveness.
While the variables of Porter's diamond model are useful terms of reference when analysing a
nation's
competitiveness,
a
weakness
of
Porter's
work
is
his
exclusive
focus
on
the
'home
base'
concept.
In
the
case
of
Canada,
Porter
did
not
adequately
consider
the
nature
of
multinational
activities.In
the
case
of
New
Zealand,
the
Porter
model
could
not
explain
the
success
of
export-dependent
and
resource-based
industries.Therefore,
applications
of
Porter's
home-
based
diamond
require
careful
consideration
and
appropriate
modication.
The
double
diamond
model,
developed
by
Rugman
and
D'Cruz,suggests
that
managers
build
upon
both
domestic
and
foreign
diamonds
to
become
globally
competitive
in
terms
of
survival,
protability,
and
growth.
While
the
Rugman
and
D'Cruz
North
American
diamond
framework
ts
well
for
Canada
and
New
Zealand,
it
does
not
carry
over
to
all
other
small
nations,
including
Korea
and
Singapore.
INTRODUCTION
PORTERS
DIAMOND
MODEL
PORTERS
DIAMOND
EXPLANATION
PROs
Of
the
MODEL
PORTERs
CRITICISM
CASE Example
References
(1)"Competitive
Advantage
of
Nations"
Michael
E.
Porter,
March~April,
1990
HBR
Download
available
at
http://online.sfsu.edu/~yywong/Porter1990HBR.pdf
(2)
"Global
Information
Technology
Report
2001~2002"
from
World
Economic
Forum
at
www.weforum.org/
site/homepublic.nsf/Content/Global+Informat
ion+Technology+Report+2001-2002
(3)
"Asia's
New
Tech
Competitors"
at
www.nsf.gov/sbe/srs/s4495/conten3d.htm
(4)
"National
Competitiveness
Analysis
"
from
the
Institute
of
Industrial
Policy
Studies
-
http://www.ips.or.kr/ncr/index.asp
(5)
www.outsourcing-service-india.com
(6)
http://www.bsau.org/
(7)
http://corsairmemory.com/products/twinx10255.htm
(8)
www.technology.gov/reports/korea/korea.pdf
(9)
http://www.quickmba.com/strategy/global/diamond/
(10)
Charles
W.
L.
Hill
&
Arun
K.
Jain,
International
Business,
Fifth
Edition,
2006,
TATA
McGraw-Hill
(11)
John
D.
Daniels
&
LeeH.
Radebaugh,
International
Business,
Ninth
Edition,
2003,
Pearson
Education