Porters Diamond Model

Topics: Mexico, International trade, North American Free Trade Agreement Pages: 11 (3529 words) Published: March 13, 2013

BA(hons) in business studies

Module name: international business management

module Teacher : Ian Norman

student Name: Mokbul Hossain

Student Id: 000762547

Question: As a management consultant advising a country of your choice, explain how u can use Porter's Diamond model to evaluate and improve the nation's competitive position.

Business world is getting complicated day by day .Companies want to do business like participating in the competition for profit or market share. We are now at globalisation era where a local company is to compete with international company (Daniels et al, 2007). Challenge for marketing strategy is to find a method of earn a sustainable competitive advantage over the other competing firms and products in a market. According to porter (1990) innovation and upgrading capacity of a specific country's industry is the indicator of a nation's competitiveness. Challenges and pressures bring companies competitive advantage over the world's best competitors.. As the base of competition creating more digestion of knowledge. Competitive advantage is built through a highly localized process. Competitive success depends on national values, economic structures, culture, histories and institutions. Every country has remarkable differences in the patterns or nature of competitive. Ultimately, nations succeed in particular industries because of positive environment most forward-looking, challenging and dynamic. This report will evaluate some significant factors and explores regarding advantages of porters diamond mode which is very crucial for any organizations competitive performances. In addition to, this report will clearly determinant about how government can help to the company's performance and other activities with actions. After that, it will unambiguously investigate with relation to the automobile industry of Mexico by applying porters diamond model with obvious explanation and examples. Overall, to conclude for this report, it studies as to porters diamond model and how it works on a particular organization to improve their functions and activities.

Michael Porter (1990) formulated the diamond model of competitive advantage which relates to classical theories of international trade. According to him a nations competitive advantage is dependent on its factor endowments which include land, labour, natural resources and the local population. Porter stated that a nation can create advanced factor endowments such as skilled workforce, strong knowledge base, advanced technology, government intervention in the form of support and aids and a strong culture. This was illustrated in the form of a diamond representing the grounds established by countries for their industries. When this theory was formulated in the eighteenth and nineteenth century, lower skills met the requirements. Hence natural resources and factors of production (Porter, 1990) were sufficient for nations to gain additional leverage. With the passage of time leading to globalisation of markets and innovation in the technological area there was a shift away from sole dependence on natural endowments.

Source: Adapted from Porter, M.E (1990) The Competitive Advantage of Nations THE DIAMOND MODEL EXPLAINED
As demonstrated by the figure above, there are four elements which lead to a nations competitive advantage. These include: * Availability of natural resource and enriched skills base * Information regarding opportunities that maybe pursued using the resources and skills * Individual goals in line with organizational goals

* Pressure on companies for innovation and investment

According to Porter’s model, there are 4 determinants of national advantage as described below: 1. Factor Conditions – This refers to the fact that a country creates its own resource, skill and technological base; in other words to...
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