Porter's Diamond theory attempts to analyze reasons for a nation's success in a particular industry. It identifies four attributes that contribute to competitive advantage: factor conditions, demand conditions, related and supporting industries, and firm strategy, structure and rivalry. The theory suggests countries focus on industries where these four attributes are most favorable and import goods in industries where they are less favorable. Chance events, government policy, and globalization can impact a nation's competitive position over time.
Porter's Diamond theory attempts to analyze reasons for a nation's success in a particular industry. It identifies four attributes that contribute to competitive advantage: factor conditions, demand conditions, related and supporting industries, and firm strategy, structure and rivalry. The theory suggests countries focus on industries where these four attributes are most favorable and import goods in industries where they are less favorable. Chance events, government policy, and globalization can impact a nation's competitive position over time.
Porter's Diamond theory attempts to analyze reasons for a nation's success in a particular industry. It identifies four attributes that contribute to competitive advantage: factor conditions, demand conditions, related and supporting industries, and firm strategy, structure and rivalry. The theory suggests countries focus on industries where these four attributes are most favorable and import goods in industries where they are less favorable. Chance events, government policy, and globalization can impact a nation's competitive position over time.
Lecture – 32 Date: May 22, 2020 Department of Management Sciences COMSATS University Islamabad – Attock Campus Porters Diamond Porter’s Diamond • It was published in 1990 • Book – Competitive advantage of nations • Theory of national competitive advantage – The theory attempts to analyse the reasons for a nation’s success in particular industry. Factor endowment • This shows a nation’s position in factors of production such as skilled labor or infrastructure necessary to aompete in a particular industry – Basic Factors – Advanced Factors Factors endowment • Basic factors – Natural resources – Climate – Geographic location – Demographics
The basic factors can provide an initial advantage
they must be supported by the advanaced factors to maintain success. Factors endowment • Advanced factors – The result of investment by people, companies and government are more likely to lead to competitive advantage – Supported by the basic factors a company must invest in the advanced factors Factors endowment • Advanced factors – Communication – Skilled Labor – Technology – Education Demand Conditions • Demand creates capabilities • Demand impact quality and innovation Related supporting industries • Creates cluster of supporting industries that are internationally competitive • These generally meet requirements of the other parts of the diamond Firm Strategy, Structure and Rivalry • Long term corporate vision is a determinant of success • Keeping in view the vision the MNE’s generally adopt structure • Presence of domestic rivalry improves a company competitiveness What Porter’s Theory Says? • Countries should be exporting products from those industries where all four components of the diamond are favorable, while importing in those countries where the components are not favorable The Role of Chance • Chance events can nullify the advantages of some competitors and bring about a shift in overall competitive position because of developments such as; • (1) new inventions, • (2) political decisions by foreign governments, • (3) wars, • (4) significant shifts in world financial markets or exchange rates, • (5) discontinuities in input costs such as oil shocks, • (6) Increase in world or regional demand, and • (7) major technological breakthroughs. The Role of Government • Government can influence all four of the major determinants through such actions as • (1) subsidies, • (2) education policies, • (3) the regulation or deregulation of capital markets, • (4) the establishment of local product standards and regulations, • (5) the purchase of goods and services, • (6) tax laws, and • (7) antitrust regulation Globalization and Corporate Strategy
• The production and distribution of products
and services of a homogeneous type and quality on a worldwide basis National Responsiveness • The ability of MNEs to understand different consumer tastes in segmented regional markets and to respond to different national standards and regulations imposed by autonomous governments and agencies Thank you
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