Porter's Diamond Model vs Indian Software

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Deanna Horwitz
Business 624 September 15, 2011

Porter’s Diamond of National Advantage and How it Decribes the Success of the Indian Software Industry

In the article “The Competitive Advantage of Nations” Michael Porter describes a diamond shaped relationship of forces that define a country’s potential for being competitive in a specified industry. The four points on the diamond representing the different forces are: factor conditions; demand conditions; firm strategy, structure and rivalry; and related and supporting industries. According to Porter, the four points apply pressure to each other resulting in a national competitive advantage. “The Indian Software Industry in 2002” describes India as a country that fits into Porter’s diamond model. The first point on the diamond represents the factor conditions, which are the important factors such as skilled labor and a specific technological base. The lack of certain factors can also apply pressure for improvements. In the article, Porter specifically describes the countries Japan and Italy explaining that many of their improvements resulted from the disadvantages of the lack of raw materials and high cost of land. Those disadvantages resulted in Japan and Italy developing efficient production methods and facilities that maximized productivity. The “Indian Software” case describes India as a country with a poor infrastructure, but a very generous supply of educated software programmers willing to work for much less than programmers in other parts of the world. In 1980 the government of India established a long range strategic plan for developing software. The government made policies to encourage the export of software. One convenient advantage of software development is that no raw materials are required. The government made some improvements to the telecommunications infrastructure to...
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