Diamond analyse the national competitive advantage.
Certain countries have diamonds which are called national competitive advantage.
For Example:
– Italy = Designing
– Germany = Engineering
– Sweden = Furniture
– Greece = Tourism
Every country could be good at something so is Porter’s diamond model there are four areas which will determine whether that country have any competitive advantage or not.
It will answer the following questions:
1. Why does a nation becomes home base of any industry?
– Like Germany for car manufacturing.
2. Why are firms able to create and sustain competitive advantage against the world’s best competitors of other country?
1) Factor Condition:
Factor condition includes nation’s production resources like infrastructure land, minerals, capital, human resources.
It also found that countries with factor disadvantage were forced to innovate and they still can gain competitive advantage.
2) Demand Condition:
The first thing that is needed here is home demand. To have competitive advantage for any industry there must be strong home demand for that product or service.
The more home demand grow the greater pressure comes to company to innovate and to improve.
And this demand condition can create competitive advantage for nation over time.
3) Related & Supporting Industries:
Success of the industry can be due to its suppliers or related industries within that nation.
Example:
Sweden is global leader in paper because of its supported by network of related industries like packaging, chemicals, wood processing
4) Firm Strategy, Structure and Rivalry:
To be competitive,
– Strategy is important
– Corporate structure is important
– Competition is important