IB B397F

Global Issues in Management

Tutorial 2
Components of National Competitiveness:
Comparative and Competitive Advantage

Porter’s Diamond of National

Competitiveness
Porter’s Diamond

Determinants:
• factor conditions
• demand conditions
• related and supporting
industries
• firm strategy, structure and
rivalry
Porter’s Diamond (extended version)

Determinants:
• factor conditions
• demand conditions
• related and supporting
industries
• firm strategy, structure
and rivalry

External/other variables:
• the role of government
Porter’s Diamond • the role of chance
extended version
Factor Conditions

Availability of factors of production necessary to compete.

These include:
• Basic factors (e.g.,natural resources, climate, location, and
demographics)
• Advanced factors (e.g., communication infrastructure,
sophisticated and skilled labor, research facilities, and
technological know-how).
Demand conditions

What is the nature of demand in the country’s market?

These include:
• The size and growth rate of the home demand
• Market segments that exist
• The composition of demand in the home market as reflected by the
various market niches that exist, and buyer sophistication and
how well the needs of buyers in the home market precede those of
buyers in other markets;
Related and supporting industries

The presence or absence in the country of supplier industries

and related industries that are internationally competitive.

These include:
• Cluster of suppliers and buyers
• Cluster of supporting industries, e.g., design, research, distribution,
marketing, etc.
Example: California wine cluster

state government agencies winemaking

grape stock
(e.g. select committee on wine equipment
production and economy)
fertilizer, pesticide, barrels
herbicides

grape harvesting bottles

equipment wineries /
growers &
processing
vineyards
facilities caps and corks

irrigation technology public relations

& advertising

educational research, and trade

organisations (e.g. Wine Institute, labels
UC Davis, culinary institutes)

specialised
publications
California (e.g. Winespectator,
agricultural cluster tourism cluster food cluster
trade journals)

source: Competitive Advantage of Nations by Michael E. Porter, 1990, Free Press

 Firm strategy, structure and rivalry

This fourth attribute refers to the nature of domestic rivalry and

conditions in a nation that determines how firms are created,
organized, and managed.

These include:
• Are there capable domestic rivals?
• Does the industry attract outstanding talent in the nation?
• Does the style of management and prevailing types of
organizational structures in the industry match the industry needs
• Do investor goals fit the competitive needs of the industry?
The role of government

Government can influence all four of the major determinants

through actions such as:
• Subsidies
• Education policies
• The regulation or deregulation of capital markets
• The establishment of local product standards and regulations
• The purchase of goods and services
• Tax laws
• Antitrust regulation
companies are unable to monopolise the market. example is the Hong Kong market, two
super market chain control the entire market, about 80%
The role of chance

• Chance events can nullify the advantages of some competitors:

• New inventions/major technological breakthroughs
• Political decisions by foreign governments
• Wars
• Significant shifts in world financial markets or exchange rates
• Discontinuities in input costs such as oil shocks
• Surges in world or regional demand
Polling question 1

Porter’s Diamond Model mainly analyze _______.

• Location-specific advantages
• Firm-specific advantages
Polling question 2

Which of the following is NOT included in Porter’s Diamond of

National Competitiveness?
• Skilled labor
• Buyer sophistication in the home country
• Domestic demand
• International rivalry
Work in groups

• Read the following paper together and fill the working sheet
• The paper and the working sheet can be downloaded from
OLE.
• Jin, B., & Moon, H. C. (2006). The diamond approach to the
competitiveness of Korea's apparel industry: Michael Porter and
beyond. Journal of Fashion Marketing and Management: An
International Journal, 10(2), 195-208.
Question 1

• The worksheet has reflected Jin & Moon, 2006 and summarized
the determinants of Porter’s Diamond for the Korean apparel
industry in 2006 or before.
• Please identify whether each item has a positive or negative
impact on the competitiveness of the Korean apparel industry.
Question 2

• The global business environment and the Korean apparel

industry have changed since the paper was published in 2006.
• Analyze the current competitiveness of the Korean apparel
industry using Porter’s Diamond (fill in the right half of the first
table in the worksheet)
Question 3

• Analyze the current competitiveness of the apparel industry of a

different country using Porter’s Diamond (fill in the second table
in the worksheet)
Example: