Porter's Diamond

Topics: International trade, Construction, Strategic management Pages: 7 (2150 words) Published: June 9, 2013
The analysis of Porter’s diamond model theory and apply in Chinese construction industry

Student number: M00377811
Student name: Chen Xinglin
Module number: MGT 4139
Module name: International Business Management
Module Tutor: Sabrina Akbar

Introduction
Nowadays, the global economy is developing faster and faster. Many countries start to pay much attention to the international competitiveness. More and more people start to research how to build up the high competitiveness in international industry. And some scholars put forward some theories to support the international industry. For example the Michael Porter diamond Model. First of all, this paper is going to introduce the Michael Porter diamond theory. Secondly, analyse this theory in details and discuss what the usefulness and defect are for the international industry. Thirdly, this paper is going to explore the how this theory is going in Chinese construction industry. At last, this paper is going to make a conclusion and give some suggestion for the Michael Porter diamond Model theory. The introduction of the Michael Porter diamond Model

The Michael Porter diamond Model was put forward by Professor Michael Porter, who is working in the American Harvard Business School. Porter’s diamond model is used to analyse why some industries in a country has the strong competitiveness in the world. Michael thinks that if a country’s industry got the high competitiveness, it depends on four factors (Grant, 1991). Factor conditions, demand conditions, related and supporting industries and firm strategy, structure and rivalry. The first factor conditions can be divided into the primary factors of production and advanced factors of production. The former means natural resources, climate and geographic location. The latter means artificial higher technology. The second demand conditions mean domestic demand structure and the international market pressure. The third are related and supporting industries. It means the competitive industries are not independent, they are supplied and supported by upstream. The forth are firm strategy, structure and rivalry. It means the way in which companies are created, set goals and are managed is important for success. In the pressure of competition, the enterprise is going to innovate in order to upgrade competitiveness. In addition, there are two variables in this theory: the government and chance. These two factors also have a large affect the international competitiveness of a country’s industry (Porter, 1990). The chance is uncontrollable, at the same time, the government’s policy is important as well. So Potter thinks these six factors are affecting a country’s international industrial competition. The usefulness and defect of Porter’s diamond theory

Porter's diamond system is a dynamic system (Cho, 1994). It emphasized the factors of the creative ability in competitive industries are more important than simple elements (Porter, 1990). In the first of the factor, factor conditions, compare with other comparative advantage theories, porter’s diamond theory does not put forward any innovation. However, this theory analysed factor conditions more specifically. It separated factor conditions on primary factors and advanced factors (Davies & Ellis 2000). Primary factors included in natural resources, climate and unskilled workers. Advanced factors included in modern communication facilities, higher education manpower, knowledge system, proprietary technology, and university research institutes. In Most industrial competitive advantages, the primary factors are in the decline, at the same time, the created and professional senior elements are more important than natural primary factors (Grant, 1991). If enterprises want to obtain a high level of competitive advantage, it has to depend on advanced factors. On the other hand, in the potter’s diamond model, each factor influences each other in the process of ascension in competitive...
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