The Porter Diamond model

The Porter diamond model was described in his book Competitive Advantage
of Nations; its an economical model theory, where Porter has approached
the facts and figures regarding excel of certain corporation in particular and
suitable locations. The Porter has practically advanced by relating the four
practical factors and the behaviors related to the particular companies
excelling in the particular demographic locations and have also established
the governments pro-active attitude towards influencing the particular
business (Bruce and Pitts, 1988).
Traditional country advantages
The traditional economic approach of comparing the competitive advantages
of the nations included Location, Land, and natural resources including the
fuels and minerals, land, population size at particular location and the
associated labor with that population. But the economic opportunity of the
nation was scarcely affected by such detriment as mentioned above rather
they were considered passive in this regard. Porters view was quite diverged
from this inherited view of factors influencing the opportunities and
considered such factors in destabilizing the expected out puts regarding the
competitive advantages.

Porters Concept of Clusters

The term clusters as perceived by the Porter was associated with the
assemblage of interrelated entrepreneurs, the interconnected industries,
suppliers and the firms that were coupled with certain demographic location.
And in the view of Porter the inclusion of capable labor, a competent
technology, strong base of knowledge, the specific culture of the nation and
alliance of the government are the factors to be created by the nations.

Diamond diagram of Porter

The factors associated with the national and competitive advantages were
explained by the Porter in his well renowned diamond shaped diagram. The
diamond here is representing the area of national play for the industrial
sector development and betterment keeping in view the international
demands and the world economic scenario. Porters diamond model explains
the four detriments which he found significant to be incorporated in the
economical affairs to get the maximum outputs. The four corners of the
Diamond Model as explained in the diamond theory are accessing the factor

conditions, incorporating the demand conditions, critically analyzing the

effects of associated and supporting industries and working logically and
wisely upon the firms structural strategy, management and rivalry.

1.Factor conditions
The factor conditions are most precisely related to the condition of the
associated inputs delivering the estimated productions that input may be in
the form of natural resources, infrastructure, technology, labor and the
related. According to Porter such factors should not be mixed up with those
of the inherited ones with reference to the standard economical theory. The
capital owned by the company, its labor strength and the associated
infrastructure are the advanced condition factors as reported by porter. The
inexpert human source and the raw resources are not included in the key
factors and similarly have no impact on the generation of the competitive
advantage, as they can be reached at any time by the company. The
specialized conditions are however difficult to generate and sustain,
especially in the case when the competitive firm have no access to this
factor, as they involve heavy investment and surely impacts the competitive
advantages. At this instant Porter also emphasize upon the inherent reasons
through his model that globally few nations and their associated companies
rank high in competition than that of the others of the same caliber because
of the political support from the national policies that are in favor of
capitalism against the inclination towards the public companies. This very
support of the government and its policies plays very important role in
gathering the revenues as well the competitive advantages in every sector.
More precisely the factor conditions actually refer to the resources that can
be subjugated by the other companies present with in the country. The factor
conditions once established become advantageous for not only the present
situation of the company but also that of the future security because once
they are established, they only need to be enhanced. The company excelling
solutions are totally dependent on the establishment of the human resource,
which is ignored in mot of the circumstances, where the companies seem
defected and prone to further imbalances. The basic as well as advanced
factor conditions include verbal communication capacity of workforce,
extraordinary skills of the workforce and the capital investment on the raw
material.
As discussed earlier in the context, the nation is the entity that gathers the
advanced factors related to human resources and the technological
excellence and if the required factors are already in access then the efforts
should be vested upon the up gradation to reach the certain criteria of
ambition attainment. The innovation techniques are to be deployed timely

after accessing the local disadvantages, as this leads to the comparable

advantage.

2. Demand Conditions
Its the practical phenomenon that the production of the local markets
increase commendably when the local product demand increases in
comparison with the foreign production. When the foreign product
consumption declines, there is an automatic up burst of the local exporting
companies in the global scenario increasing the global competitiveness. This
would develop the home market demand owing to the innovative approaches
imopr9oving the product quality to stand in the competitive scenario. In case
of Japan, the home production and extreme home demand of the products
estimates the success of electronic market there.
According to the Porter the national advantage is the outcome of increasing
demand of the home market and the local market helps in a way by
changing the trends to be comparable with the global innovations and the
trends being followed there.

3. Associated and supporting Industries

The estimation of the nations entrepreneurs towards success is
accompanied with the competition of the local market. The innovation of cost
effective methods, and innovative products is very much dependent upon
the competition of the local supportive suppliers and industries ultimately
promoting the ever greatest competition experience with in national firms.
Italian shoe industry is famous in the entire world and it would be very just to
quote it here. The success of this Italian industry owes to its competitive
standing to the couple of related national industries and firms that
popularized it around the globe.
The competition that is experienced with in the local markets boosts up the
trends setting, innovations, and the balanced merchandizing costs. The local
competition creates a certain type of pressure that keeps the industrialists,
suppliers and retailers in a proper balance and harmony.
4. Firm Structural Strategy, Management and Rivalry

The global presence of the entrepreneur is possible because of its strong

infrastructure and management that definitely guides the competitive path
to be followed up by the country. In case of local excel the companys
hierarchy plays the basic role as the strategic advancement of the

compatible people in engineering and technology sector improves the

production state pf the company; such phenomenon of hierarchy is seen in
German companies. Some industries such as that of design and Biochemistry
have organic strategies that help them grow in the proper pace. The global
competitive advantage is achieved only when the local market rivalry
increases credibly, the companies that can withstand rivalry could preferably
establish on the international level. If the competition with in the local
market is not defined then there would be a difficulty in managing the
nations position with in the stable global economies, giving roots to other
defined problems.
The Porters diamond model provides the strength to business strategic
manager, to look upon and decide wisely that which factors are present with
in their local market and then may decide the key factor to be taken along
for the global propulsion of their business empire and indeed their nation.
The same process can be followed from top to bottom in the reverse order to
analyze the international demands first and then visualizing them in the local
market for their exploitation to enter into the internationalization scenario.
This approach also helps in accessing the required local factors that could
support the international demands to achieve to raise the national market
globally. The ultimate assistance that the Porters diamond model can
provide is the decision of capital investments that which part of the globe
would be safe to invest and get the double returns and which would not be
suitable for investment.
The firms strategy is altered directly or indirectly by the local conditions
being experienced by the entrepreneur in the particular time period. The
strategic shift may be because the interference of the states policies with in
the firm along with the local competitors and the rivals in case of leading
away from the required advantage.
The Porters Diamond model and theory is universally applied and is readily
accepted for its beneficial properties. The four factors of the theory have
specifically associated significance with them, which really have very prolific
impacts on the national as well as international business economics. The
economic models should be very critically evaluated and judged before the
implementation of it on any company or entrepreneur, as all the factors may
or may not be suitable for specific type of company economics.