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Porter Diamond Model
Porter Diamond Model
Presented by:
RITU GUPTA
FACTOR CONDITIONS
A country creates its own factors such as skilled resources & technological base. The stock of factors at a given time is less important than the extent that they are upgraded & deployed. Local disadvantages in factors of production force innovation. This innovation often leads to a national comparative advantage.
DEMAND CONDITIONS
When the market for a particular product is larger locally than in foreign markets, the local firm devote more attention to that product than foreign firms. A more demanding local market leads to national advantage. A strong trend setting, local market helps local firms anticipate global firms.
The effect of one point depends on the others. For example, factor disadvantages will not lead firms to innovate unless there is sufficient rivalry. The diamond also is a self-reinforcing system. For example, a high level of rivalry often leads to the formation of unique specialized factors.
GOVERNMENTS ROLE
Encourage companies to raise their performance. Stimulate early demand for advanced products. Focus on specialized factor creation. Stimulate local rivalry by limiting direct cooperation & enforcing antitrust regulations.
CONTDuu..
Domestic rivalry in japanese fax machine industry pushed innovation & resulted in rapid cost reductions. Govt. support : NTT (the state owned telecom company) changed its cumbersome approval requirements for each installation to a general type approval.
Low manufacturing activity created ASEAN countries dependence on service related industries. Less of industrial activity has created presence of skilled labor in ASEAN Less presence of natural resources led to migration to non-natural resources. Good presence of English speaking labor.
The local customers demand high level of customer service which in turn has created an environment within firms to delight their customers. The high reliability on service sector is one of the main reason for creating a customer led environment.
Establishment of free trade zone by 2010. Encouragement of free movement of peoples. Tax rebates & smooth legal steps in start ups Recognition of infrastructure, quality standards & environmental standards.