Criticisms of Porter's Diamond
CRITICISMS OF PORTER’S DIAMOND
I. INTRODUCTION
The book, “The Competitive Advantage of Nations”, shows how Michael Porter studied ten developed countries and 100 industries in order to answer questions concerning the national competitive advantage which he found to be inadequately explained by the Heckscher-Ohlin theory and the theory of comparative advantage. (Hill, 2009, p. 189).
These questions include: A. “Why are some nations more successful than others in international competition?” B. “Why does a nation achieve international success in a particular industry?”
The model comprises of four attributes of a nation constituting the diamond as shown in figure 1. The attributes shape the national environment in which local firms compete (Porter, 1990; Yetton, Craig, Davis, & Hilmer, 1992, pp. 91-93).
Figure 1: The determinants of national competitive advantage (Porter, 1990, p. 127) 1. Factor conditions/endowments: a nation’s factors of production such as skilled labour and infrastructure are essential in its competitiveness. 2. Demand conditions: the characters of domestic market demand for the industry’s product or service. 3. Related and supporting industries: the presence or absence of internationally competitive supplier industries and related industries within the nation. 4. Firm strategy, structure and rivalry: the nature of domestic competition and the conditions that determine how companies are created, organized and managed.
Porter also mentioned two additional factors that can have an impact on the national diamond: 5. Government: Government can either positively or negatively influence each of the four attributes by its choice of policy. 6. Chance: Industry structure can be reshaped by unforeseen events which create opportunity for firms within nations or otherwise.
However, there are several criticisms on the book and the model itself:
Firstly, the length of the book is too long and complex to be used by managers
I. INTRODUCTION
The book, “The Competitive Advantage of Nations”, shows how Michael Porter studied ten developed countries and 100 industries in order to answer questions concerning the national competitive advantage which he found to be inadequately explained by the Heckscher-Ohlin theory and the theory of comparative advantage. (Hill, 2009, p. 189).
These questions include: A. “Why are some nations more successful than others in international competition?” B. “Why does a nation achieve international success in a particular industry?”
The model comprises of four attributes of a nation constituting the diamond as shown in figure 1. The attributes shape the national environment in which local firms compete (Porter, 1990; Yetton, Craig, Davis, & Hilmer, 1992, pp. 91-93).
Figure 1: The determinants of national competitive advantage (Porter, 1990, p. 127) 1. Factor conditions/endowments: a nation’s factors of production such as skilled labour and infrastructure are essential in its competitiveness. 2. Demand conditions: the characters of domestic market demand for the industry’s product or service. 3. Related and supporting industries: the presence or absence of internationally competitive supplier industries and related industries within the nation. 4. Firm strategy, structure and rivalry: the nature of domestic competition and the conditions that determine how companies are created, organized and managed.
Porter also mentioned two additional factors that can have an impact on the national diamond: 5. Government: Government can either positively or negatively influence each of the four attributes by its choice of policy. 6. Chance: Industry structure can be reshaped by unforeseen events which create opportunity for firms within nations or otherwise.
However, there are several criticisms on the book and the model itself:
Firstly, the length of the book is too long and complex to be used by managers
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