Models of TQM

DIAMOND MODEL
• THE PORTER DIAMOND
• The diamond model is an economical model
developed by Michael Porter in his book The
Competitive Advantage of Nations.

• where he published his theory of why particular

industries become competitive in particular
locations.
 WHAT IS THE DIAMOND MODEL?

• Model that can help to 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, and
5. Local population size.
 CLUSTERS

• Porter says that sustained industrial growth is not

possible only by these factors.

• Abundance of such factors may also undermine

competitive advantage.

• He introduces a concept called "clusters" or groups

of interconnected firms, suppliers, related industries,
and institutions, that arise in certain locations.
 CLUSTERS
• These clusters are geographic concentrations of
interconnected companies, specialized suppliers, service
providers, and associated institutions in a particular field.

• These clusters are geographic concentrations of

interconnected companies, specialized suppliers, service
providers, and associated institutions in a particular field.
• They grow on locations where enough resources and
competences amass
 Clusters influence

Porter says clusters can influence competition

in three ways:
• They can increase the productivity of the
companies in the cluster.
• They can drive innovation in the field.
• They can stimulate new businesses in the
field.
 examples
• Some well-known examples of Clusters are
USA/Silicon Valley (computers),
Netherlands/Rotterdam (logistics),
India/Bangalore (software outsourcing),
USA/Hollywood (movies), France/Paris
(fashion).
 examples
• According to Porter, 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.
 

DIAMOND MODEL AND CLUSTERS FORUM

 Porter analysis
• The approach looks at clusters of industries,
where the competitiveness of one company is
related to the performance of other companies
and other factors tied together in the value-added
chain, in customer-client relation, or in local or
regional contexts.
The Porter analysis was made in
two steps.
• First, clusters of successful industries have been
mapped in 10 important trading nations.

• In the second, the history of competition in

particular industries is examined to clarify the
dynamic process by which competitive advantage
was created.
 Porter analysis

• The second step in Porter's analysis deals with

the dynamic process by which competitive
advantage is created.
• The basic method in these studies is historical
analysis.
• The phenomena that are analysed are classified
into six broad factors incorporated into the Porter
diamond, which has become a key tool for the
analysis of competitiveness:
 FACTORS FOR COMPETITIVE
ADVANTAGE
• Factor conditions are human resources, physical
resources, knowledge resources, capital resources
and infrastructure.

• Specialized resources are often specific for an

industry and important for its competitiveness.

• Specific resources can be created to compensate

for factor disadvantages.
 FACTORS
• Demand conditions in the home market can help
companies create a competitive advantage, when
sophisticated home market buyers pressure firms to
innovate faster and to create more advanced products
that those of competitors.

• If the customers in an economy are very demanding,

the pressure facing firms to constantly improve their
competitiveness via innovative products, through high
quality, etc, will be greater.
 FACTORS
• Related and supporting industries can produce
inputs which are important for innovation and
internationalization. These industries provide cost-
effective inputs, but they also participate in the
upgrading process, thus stimulating other companies
in the chain to innovate.
• Spatial proximity of upstream or downstream
industries facilitates the exchange of information and
promotes a continuous exchange of ideas and
innovations.
 FACTORS
• Firm strategy, structure and rivalry constitute
the fourth determinant of competitiveness. The
way in which companies are created, set goals and
are managed is important for success.
• But the presence of intense rivalry in the home
base is also important; it creates pressure to
innovate in order to upgrade competitiveness.
• The world is dominated by dynamic conditions.
Direct competition impels firms to work for
increases in productivity and innovation.
 FACTORS
• Government can influence each of the above
four determinants of competitiveness. Clearly
government can influence the supply conditions
of key production factors, demand conditions in
the home market, and competition between firms.
Government interventions can occur at local,
regional, national or supranational level.
 FACTORS
• Chance events are occurrences that are outside of
control of a firm. They are important because
they create discontinuities in which some gain
competitive positions and some lose.

• The Porter thesis is that these factors interact

with each other to create conditions where
innovation and improved competitiveness occurs.