Factor endowments refers to a nation’s position in factors of production necessary to compete in a given industry. It can lead to competitive advantage. Factor endowments distinguishing between basic factors (natural resources, climate, location, and demographics) and advanced factors (communication infrastructure, sophisticated and skilled labour, research facilities, and technological know-how)
Demand conditions refers to nature of home demand for the industry’s product or service. The nature of home demand for the industry’s product or service influences the development of capabilities. Porter emphasizes the role home demand plays in upgrading competitive advantage. If the domestic consumers are sophisticated and demanding, it creates pressure to local firms to meet high standard of product quality and to produce innovation products.
Related and supporting Industries also a national advantage in an industry. The presence supplier industries or related industries that are internationally competitive can spill over and contribute to other industries. Successful industries tend to be groped in clusters of related industries. This was one of the most pervasive findings of Porter’s study.
Firm Strategy, Structure, and Rivalry explains the conditions governing how companies are created, organized, and managed, and the nature of domestic rivalry. Porter makes two important points, First is different nations are characterized by different management ideologies, which either help them or do not help them to build national competitive advantage. Second is that there is a strong association between vigorous domestic rivalry and the creation and persistence of competitive advantage in an industry. Vigorous domestic rivalry induces firms to look for ways to improve efficiency, which makes them better international competitors because domestic rivalry creates pressures to innovate, to improve quality, to reduce costs, and to invest in upgrading advanced factors. All this helps to create world class competitors.
In additional, Government policy and Chance are two additional variables can influence the national diamond in important ways, since government can affect demand through product standards, influence rivalry through regulation and antitrust laws, impact the availability of highly educated workers and advanced transportation infrastructure.
Description of the industry
Nowadays, automobile industry is one of the Japanese economy’s core industrial sectors. Automobile manufacturing integrates many supporting industries. Automobile use is the focus of a wide range of related industries. About 9% of Japan’s working population directly or indirectly works involved in auto industry related work. Auto production accounts for 16% of the total value of Japan’s manufacturing shipments and for 37% of the value of the machinery industries’ combined shipments. (The Japan Automobile Manufacturers Association, Inc)
In the past of late 19th century, Japan was opened to foreigners for trading and their industry began to grow quickly until 1930s it became a major industrial nation. However, during the Second World War in 1945 American army threw two atomic bombs in Hiroshima and Nagasaki, these two bombs taken away possibly 600,000 Japan civilian lives and most of Japan’s industry was destroyed. Thereafter, Emperor Hirohito authorized a surrender whereby he was allowed to retain his throne as a symbol of national unity, but it was...