Summary of the Diamond model Porter. Abstract Michael Porter The Diamond model of Michael Porter for the Competitive Advantage of Nations offers a model that can help understand the competitive position of a nation in global competition. This model can also be used for other major geographic regions.
Supporting Industries The individual points on the diamond and the diamond as a whole affect four ingredients that lead to a national comparative advantage. The points of the diamond are described as follows. Factor Conditions A country creates its own important factors such as skilled resources and technological base.
The stock of factors at a given time is less important than the extent that they are upgraded and deployed. Local disadvantages in factors of production force innovation. Adverse conditions such as labor shortages or scarce raw materials force firms to develop new methods, and 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 firms devote more attention to that product than do foreign firms, leading to a competitive advantage when the local firms begin exporting the product.
A more demanding local market leads to national advantage. A strong, trend-setting local market helps local firms anticipate global trends. Related and Supporting Industries When local supporting industries are competitive, firms enjoy more cost effective and innovative inputs.
This effect is strengthened when the suppliers themselves are strong global competitors. Firm Strategy, Structure, and Rivalry Local conditions affect firm strategy.
For example, German companies tend to be hierarchical. Italian companies tend to be smaller and are run more like extended families. Such strategy and structure helps to determine in which types of industries a nation's firms will excel. In Porter's Five Forces model, low rivalry made an industry attractive.
While at a single point in time a firm prefers less rivalry, over the long run more local rivalry is better since it puts pressure on firms to innovate and improve. In fact, high local rivalry results in less global rivalry.
Local rivalry forces firms to move beyond basic advantages that the home country may enjoy, such as low factor costs. The Diamond as a System 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.
Government's Role The role of government in the model is to: Encourage companies to raise their performance, for example by enforcing strict product standards.
Stimulate early demand for advanced products. Focus on specialized factor creation. Stimulate local rivalry by limiting direct cooperation and enforcing antitrust regulations.
Application to the Japanese Fax Machine Industry The Japanese facsimile industry illustrates the diamond of national advantage. Japanese firms achieved dominance is this industry for the following reasons: Japan has a relatively high number of electrical engineers per capita.Essay Economics Report vaccination rates in Australia, it is crucial to Australian governments to increase the national immunisation rates.
This report will focus on this issue through Australian immunisation rates, assessment on any possible government failure, supporting by economic theory. Economics Q & A - 1) The current recession is the longest since the Great Depression in the 's.
We are still far from a recovery with unemployment at about % . Defining Clusters of Related Industries Mercedes Delgado, Michael E. Porter, Scott Stern. NBER Working Paper No.
Issued in August NBER Program(s):Productivity, Innovation, and Entrepreneurship Clusters are geographic concentrations of industries related by knowledge, skills, inputs, demand, and/or other linkages.
Industry and Economic Analysis. and a group that provides economic support to Import Injury cases. These reports provide expert analyses of trade-related issues in services industries, including global industry production and consumption trends, global and regional trade flows, barriers to international trade in services, and other.
The related and supporting industries also encourage and facilitate the development of wine industry as there are years of development and the government’s highlight. For example, in tourism the ability of a hotel to create value for its customers is strongly relied on the quality of local companies in many other related and supporting industries, from agroindustries, to restaurants, to transportation, to travel agents, to shops, and to financial and health services.