– An example where Porter’s Diamond can be used to explain a regional advantage is in Germany’s luxury high power car manufacturing industry, for brands such as Audi.
– The car manufacturing industry in German has a regional advantage because it satisfies the four key factors in Porter’s Diamond. With firm strategy and rivalry, we see that there is strong rivalry amongst lots of car manufacturers and so they compete intensely and keep developing more innovative and quality products.
– There are certain demand conditions amongst the homebuyers. In parts of Germany, there are no speed limits, so the sophisticated homebuyers want more powerful cars. Consequently, the industry aims to cater for this particular need by developing innovative engines.
– There are also related and supporting industries such as the iron and steel industry which provide materials for car manufacturers, high level of education and training in the workforce, banks for capital, component suppliers and IT infrastructure.
– There are also factor conditions, which include skilled engineers from renowned German universities and the government’s focus on scientific research, which helps to push the car manufacturing industry.
– The government has played a major role in creating the regional advantage as it supported and funded scientific research and launched the construction of more roads and canals in the 19th century. By, satisfying all these factors in Porter’s Diamond it, therefore, helps to explain why Germany’s luxury high power car manufacturing industry has a regional advantage.