Porter's Diamond

Topics: Competition, Industry, Manufacturing Pages: 1 (350 words) Published: February 2, 2006
Data on the "competitiveness of nations" can be found on www.imd.ch/wcy/ranking/. This website provides a ranking on a variety of criteria for 49 countries. How might Porter's diamond of national advantage help to explain the rankings for some of thes countries for certain industries that interest you? According to Porter, a nation attains a competitive advantage if its firms are competitive. Firms become competitive through innovation. Innovation can include technical improvements to the product or to the production process. Four attributes of a nation comprise Porter's "Diamond" of national advantage. They are: factor conditions, demand conditions, related and supporting industries, and domestic rivalry. Factor conditions refers to inputs used as factors of production - such as labor, land, natural resources, capital and infrastructure. Switzerland was the first country to experience labor shortages. They abandoned labor-intensive watches and concentrated on innovative/high-end watches. Japan has high priced land and so its factory space is at a premium. This lead to just-in-time inventory Sweden has a short building season and high construction costs. These two things combined created a need for pre-fabricated houses. Demand conditions states that a sophisticated domestic market is an important element to producing competitiveness. For example the French wine industry. The French are sophisticated wine consumers. These consumers force and help French wineries to produce high quality wines. Related and supporting industries states that a set of strong related and supporting industries is important to the competitiveness of firms. This includes suppliers and related industries. This usually occurs at a regional level as opposed to a national level. Examples include Silicon valley in the U.S., Detroit (for the auto industry) and Italy (leather-shoes-other leather goods industry). In Porter's case domestic rivalry is intense competition that spurs innovation....
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