Hi friends,
I am a MBA student as a part of my term paper please help how do i apply michael porters diamond theory as its application in any industry.
I have got the theoritical base but i cannot understand how do i apply this theory in any industry.
From India, Mumbai
I am a MBA student as a part of my term paper please help how do i apply michael porters diamond theory as its application in any industry.
I have got the theoritical base but i cannot understand how do i apply this theory in any industry.
From India, Mumbai
PORTER'S DIAMOND OF NATIONAL ADVANTAGE
What is the Diamond Model? Description
The Diamond Model of Michael Porter for the competitive advantage of Nations offers a model that can help understand the comparative position of a nation in global competition. The model can also be used for major geographic regions.
Traditional country advantages
Traditionally, economic theory mentions the following factors for comparative advantage for regions or countries:
1. Land
2. Location
3. Natural resources (minerals, energy)
4. Labor, and
5. Local population size.
Because these 5 factors can hardly be influenced, this fits in a rather passive (inherited) view regarding national economic opportunity.
Porter says that sustained industrial growth has hardly ever been built on above mentioned basic inherited factors. Abundance of such factors may actually undermine competitive advantage! He introduces a concept called "clusters" or groups of interconnected firms, suppliers, related industries, and institutions, that arise in certain locations.
Porter Diamond Nations
According to Porter, as a rule competitive advantage of nations is the outcome of 4 interlinked advanced factors and activities in and between companies in these clusters. These can be influenced in a pro-active way by government.
PORTER argued that a nation can create new advanced factor
endowments such as skilled labor, a strong technology and
knowledge base, government support, and culture. PORTER
used a diamond shaped diagram as a basis of a framework
to illustrate the determinants of national advantage. The
diamond represents the national playing field that the
countries establish for their industries.
The points of the diamond are described as follows
1.FACTOR CONDITIONS
-a country creates its own important factors such as skilled
resources and technological base.
-these factors are upgraded / deployed over time to meet
the demand.
-local disadvantges force innovations. new methods and
hence comparative advantage.
2.DEMAND CONDITIONS
-a more demanding local market leads to national advantage.
-a strong trend setting local market helps local firms anticipate
global trends.
3.RELATED AND SUPPORTING INDUSTRIES.
-local competition creates innovations and cost effectiveness.
-this also puts pressure on local suppliers to lift their game.
4.FIRM STRATEGY , STRUCTURE AND RIVALRY.
-local conditions affect firm strategy.
-local rivalry forces firm to move beyond basic advantages.
THE DIAMOND AS A SYSTEM
-the effect of one point depends on the others.
-it is a self-reinforcing system.
THE ROLE OF THE GOVERNMENT IN THIS MODEL
-to encourage
-to stimulate
-to help to create
growth in industries.
=============================================
In terms of application, you can take the
example of two industries in INDIA,
1. BPO BUSINESS.
2. KPO BUSINESS.
BPO IS ESTABLISHED AND IS ON THE DEVELOPMENT STAGE.
KPO IS ON THE THRESHOLD OF GROWTH.
IF you are on the lookout of establishing business in these two areas,
then you would conduct a cluster analysis.
THE PASSIVE ANALYSIS OF
1. Land
-available in pleanty.
2. Location
-strategic locations are available.
3. Natural resources (minerals, energy)
-apart from energy, all other resources are available
4. Labor, and
-skilled and unskilled labors are available in plenty.
5. Local population size.
-local market size has the potential to absorb any excess production.
THE ACTIVE / PROACTIVE ANALYSIS OF
1.FACTOR CONDITIONS
-INDIA has created its own important factors such as skilled
resources and technological base for expanding BPOs / KPOs
-INDIA is upgrading / deploying resources over time to meet
the demand.
-new innovations. new methods has given the
local industry the comparative advantage.
2.DEMAND CONDITIONS
-a more demanding local/ global market has given INDIA
the international / national advantage.
-a strong trend setting local market has helped local firms anticipate
global trends.
3.RELATED AND SUPPORTING INDUSTRIES.
-local competition has created innovations and cost effectiveness.
for the INDIAN BPOs AND KPOs.
-this has also put the pressure on local suppliers to lift their game.
4.FIRM STRATEGY , STRUCTURE AND RIVALRY.
-local conditions have affected various firms strategy.
-local rivalry have forced firms to move beyond basic advantages.
examples INFOSYS , WIPRO AND TCS [ TATAS]
5. THE ROLE OF THE INDIAN GOVERNMENT IN THIS MODEL
-INDIAN GOVERNMENT is encouraging more BPOs / KPOs.
-INDIAN GOVERNMENT IS stimulating with paperwork reforms.
-INDIAN GOVERNMENT is helping to create more skilled labors.
-INDIAN GOVERNMENT is providing infrastructures to attract
more industries.
THIS IS JUST A QUICK MACRO APPROACH, TO SHOW
HOW IT CAN BE DONE.
IN REAL LIFE, YOU HAVE TO CONDUCT A DEEP / MICRO
APPROACH TO DETERMINE THE FEASIBILITY .
REGARDS
LEO LINGHAM
From India, Mumbai
260What is the Diamond Model? Description
The Diamond Model of Michael Porter for the competitive advantage of Nations offers a model that can help understand the comparative position of a nation in global competition. The model can also be used for major geographic regions.
Traditional country advantages
Traditionally, economic theory mentions the following factors for comparative advantage for regions or countries:
1. Land
2. Location
3. Natural resources (minerals, energy)
4. Labor, and
5. Local population size.
Because these 5 factors can hardly be influenced, this fits in a rather passive (inherited) view regarding national economic opportunity.
Porter says that sustained industrial growth has hardly ever been built on above mentioned basic inherited factors. Abundance of such factors may actually undermine competitive advantage! He introduces a concept called "clusters" or groups of interconnected firms, suppliers, related industries, and institutions, that arise in certain locations.
Porter Diamond Nations
According to Porter, as a rule competitive advantage of nations is the outcome of 4 interlinked advanced factors and activities in and between companies in these clusters. These can be influenced in a pro-active way by government.
PORTER argued that a nation can create new advanced factor
endowments such as skilled labor, a strong technology and
knowledge base, government support, and culture. PORTER
used a diamond shaped diagram as a basis of a framework
to illustrate the determinants of national advantage. The
diamond represents the national playing field that the
countries establish for their industries.
The points of the diamond are described as follows
1.FACTOR CONDITIONS
-a country creates its own important factors such as skilled
resources and technological base.
-these factors are upgraded / deployed over time to meet
the demand.
-local disadvantges force innovations. new methods and
hence comparative advantage.
2.DEMAND CONDITIONS
-a more demanding local market leads to national advantage.
-a strong trend setting local market helps local firms anticipate
global trends.
3.RELATED AND SUPPORTING INDUSTRIES.
-local competition creates innovations and cost effectiveness.
-this also puts pressure on local suppliers to lift their game.
4.FIRM STRATEGY , STRUCTURE AND RIVALRY.
-local conditions affect firm strategy.
-local rivalry forces firm to move beyond basic advantages.
THE DIAMOND AS A SYSTEM
-the effect of one point depends on the others.
-it is a self-reinforcing system.
THE ROLE OF THE GOVERNMENT IN THIS MODEL
-to encourage
-to stimulate
-to help to create
growth in industries.
=============================================
In terms of application, you can take the
example of two industries in INDIA,
1. BPO BUSINESS.
2. KPO BUSINESS.
BPO IS ESTABLISHED AND IS ON THE DEVELOPMENT STAGE.
KPO IS ON THE THRESHOLD OF GROWTH.
IF you are on the lookout of establishing business in these two areas,
then you would conduct a cluster analysis.
THE PASSIVE ANALYSIS OF
1. Land
-available in pleanty.
2. Location
-strategic locations are available.
3. Natural resources (minerals, energy)
-apart from energy, all other resources are available
4. Labor, and
-skilled and unskilled labors are available in plenty.
5. Local population size.
-local market size has the potential to absorb any excess production.
THE ACTIVE / PROACTIVE ANALYSIS OF
1.FACTOR CONDITIONS
-INDIA has created its own important factors such as skilled
resources and technological base for expanding BPOs / KPOs
-INDIA is upgrading / deploying resources over time to meet
the demand.
-new innovations. new methods has given the
local industry the comparative advantage.
2.DEMAND CONDITIONS
-a more demanding local/ global market has given INDIA
the international / national advantage.
-a strong trend setting local market has helped local firms anticipate
global trends.
3.RELATED AND SUPPORTING INDUSTRIES.
-local competition has created innovations and cost effectiveness.
for the INDIAN BPOs AND KPOs.
-this has also put the pressure on local suppliers to lift their game.
4.FIRM STRATEGY , STRUCTURE AND RIVALRY.
-local conditions have affected various firms strategy.
-local rivalry have forced firms to move beyond basic advantages.
examples INFOSYS , WIPRO AND TCS [ TATAS]
5. THE ROLE OF THE INDIAN GOVERNMENT IN THIS MODEL
-INDIAN GOVERNMENT is encouraging more BPOs / KPOs.
-INDIAN GOVERNMENT IS stimulating with paperwork reforms.
-INDIAN GOVERNMENT is helping to create more skilled labors.
-INDIAN GOVERNMENT is providing infrastructures to attract
more industries.
THIS IS JUST A QUICK MACRO APPROACH, TO SHOW
HOW IT CAN BE DONE.
IN REAL LIFE, YOU HAVE TO CONDUCT A DEEP / MICRO
APPROACH TO DETERMINE THE FEASIBILITY .
REGARDS
LEO LINGHAM
From India, Mumbai
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