Porters Diamond Model

Submitted By Krishnaswamy R (15) ArjunraoBhoj (19) Saeed Attar (06) Kazim Abbas (11) Manish Kaul (10) NomanShaikh (26)

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 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 factorendowments such as skilled labor, a strong technology and knowledge base, government support, and culture. PORTERused a diamond shaped diagram as a basis of a frameworkto 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.FIRM STRATEGY, STRUCTURE AND RIVALRY -local conditions affect firm strategy. -local rivalry forces firm to move beyond basic advantages.. 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. FACTOR CONDITIONS -a country creates its own important factors such as skilledresources and technological base. -these factors are upgraded / deployed over time to meetthe demand. -local disadvantages force innovations, new methods and hence comparative advantage. 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.

Telecom Industry 1. Firm Strategy, Structure and Rivalry - Intensive competition in the country has made it possible for service providers to offer the services with lowers fare in the world, profitability. - Many new handset have been launched. 2. Demand Conditions - India has a large middle class of 300 million. - Growing affordability and lifetime free schemes have care a market at the bottom of the pyramid. - Low tele-density (~18%) offers huge future potential. 3. Related and Supporting Industries - Competent handset manufacturers have produced the lowest priced handsets for the Indian market. - Handset players are setting up manufacturing bases in India for better operation management. - Many telecom and equipment and software companies are based in India. 4. Factor Conditions - Presence of skilled labour pool. - Rapidly developing robust telecom infrastructure. - Increasing disposable income of consumers. - Increasing demand due to changing lifestyles and growing attraction for mobiles with new features. Government - The government extends full support to industry through reform processes. - Policies are in place to safeguard the interests of service providers, as well as those of consumers.

Tourism Industry 1. Firm Strategy, Structure and Rivalry - Many firms both small and large ones. - Main strategy: Low price competition and market segment penetration. - Hotels are more competitive and rivalry among them is more apparent. 2. Demand Conditions - Tourism firms and hotels are mainly concentrated on demands ofboth the local and foreign tourists. - Spendable income has increased amongst the people within the country, and people travel to holiday destination taking their family and friends. - Also to take some time off from their busy schedule, people have started travelling to holiday destinations. 3. Related and Supporting Industries - Tourism industry is closely allied with other industries like transportation, recreational activities, hospitality industry, etc. - These related industries are growing in and is responsible for creating many job opportunities and also providing service to the tourists. 4. Factor Conditions - India has lot of man power and skilled labours. - Small capital investment. - Administrative, scientific and technological infrastructure. - The geography of India is big and it has a variety of places known for its historical monuments and also for its wildlife. Government - The local state governments are taking steps to improve their state tourism by identifying those places to which tourist often visit and improving its infrastructure. Chance It includes exchange rate speculations and terrorism which has an impact on the Tourism of India.