Porters Diamond in India

Topics: India, International economics, Michael Porter Pages: 8 (2017 words) Published: June 3, 2011
Executive Summary
What are the secrets of India’s success in information technology? By using Porter’s Diamond Model, this article tries to answer that question. Based on the analysis, it seems the only determinant in the Porter’s Diamond that creates India’s success is Factor Condition (i.e. the Indian intellectual capital and “Indian connection” in Silicon Valley). The supporting determinant outside the diamond is the outsourcing trend in current global competition, which can be considered as the Chance in the Porter’s Model. This could be mean one of these possibilities: either Indian success will not be sustainable or Porter’s model needs revision. Talking about Porter’s model revision, it is necessary to consider Landes’ perspective on that model. Landes shows that historical and socio-cultural can be a big factor that makes a nation more competitive than others. In India’s example, its ancient civilization has provided foundation of knowledge in society that creates the Indian intellectual capital plus its ‘advantage’ being familiar with English language after occupied by British Empire for hundred years. India now has become synonymous with Information Technology (IT). Its software developers and IT products/services are only the second after the United States. In fact, more and more IT jobs are outsourced from the United States to India that makes IT job markets in the United States are suffered. What are the secrets that make India can emerge as a leading IT country among other countries especially in Asia? Using the Porter’s Diamond Model, the answer of that question will be discussed in this paper. We will see whether Porter’s Diamond Model can explain the primary causes of India’s competitive advantages in the information technology sector. Porter’s Diamond Model explains that there are four determinants of national competitive advantage. Those components are: Factor Conditions, Demand Conditions, Related/Supporting Industries, and Firm/Industry Structure/Strategy. [1] One important point of Porter’s model is that the interaction among all those factors is very critical. However, does India have all those determinants work and interact each other to create this huge IT power? To answer that question, we need to analytically discuss what makes India so powerful in IT. Firstly, we all know that India is one of the largest pools of the best engineers and highly educated people. India has a long history in producing smart and bright engineers from its education system. India’s strong emphasize in math in its basic education has leads Indian to be very competent in engineering field especially in information and computer field. In addition, most universities are highly focused on quantitative skill and engineering is considered the best field, no wonder if India has produced the best engineers among other nations. This intellectual capital is the Factor Condition in the Porter’s Diamond Model, specifically, the advance factor. India can provide world class intellectual capital with very low cost. The intellectual capital is the biggest determinant of India’s success in IT. Combined with its high population, India can provide lower cost- only 40 to 50% of the cost spent by the US companies with the same or even higher quality. [2] What about the Demand Condition? Unlike Porter’s Model, the India great leap in IT has not begun with great home demand. In contrary it began with the demand of some US companies such as American Express and General Electric. [3] It was when some of . US companies began its Business Process Outsource (BPO) plan. The global competition made global company looked for other alternative to cut cost and stay competitive in global market. The alternative was found; they had to find other parties that could provide same products/services with lower cost. Then, India came up as the place of alternative for outsource given its intellectual capital. By that explanation, it does not mean that there...
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