More Porter’s Diamond Model Examples and Templates

Porter's Diamond Model

Porter's Diamond Model

Porter's Diamond

Porter's Diamond

Porter's Diamond Model Template

Porter's Diamond Model Template

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Four Ps of Marketing

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Porter's Five Forces Analysis

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Guide and Best Practices

The Porter’s diamond model or the Porter Diamond Theory of National Advantage, is an economic model developed by Michale Porter. It is designed to help nations understand why some of its industries are more competitive internationally than others. The model also helps answer the question why companies from one country or region are able to sustain competitive advantage in a particular industry. It’s based on 4 factors that help determine national competitive advantage; Factor conditions/ Demand conditions/ Firm strategy, Structure, and Rivalry/ Related and Supporting Industries.

Porter’s Diamond Model Explained

  • Factor conditions: this refers to the different types of resources available to the nation as a function of its location. Some of these factors are created such as skilled labor forces, infrastructure, and capital, while other factors are natural such as raw material, land, weather conditions, etc. According to Porter, the created factor conditions are more important than the natural ones as they cannot be duplicated and hence help the nation’s competitive advantage.
  • Demand conditions: this explains the demand for the product or service in the home market. Such demand from local customers compels companies to improve quality, innovage and grow. This will allow companies to gain early insight into future needs of customers and innovate faster hence giving them a competitive advantage over their foreign rivals.
  • Related and supporting industries: the presence of related and supporting industries within the nation itself is important for a business to grow, innovate, provide more value to the customers and become more competitive globally. According to Porter, the success of one industry is dependent on the success of its related and supporting industries, as internationally competitive suppliers can provide cost-effective access to inputs.
  • Firm strategy, structure and rivalry: this factor explores the competition faced by an industry in its home market and how that leads them to further improve them in terms of product or service quality, customer service, manufacturing techniques, etc. This competition with one another will ultimately reflect in the growth of the nation itself.
  • The role of government is another component that is connected to Porter’s diamond model in which it’s described as both a ‘catalyst and challenger’. While the governments cannot create competitive industries, they can push and encourage companies to improve themselves and become more competitive.
  • The other component is chance. Although Porter hasn’t officially mentioned chance or luck, it is often associated with the diamond model. There are external events such as natural disasters or war that can make a positive or negative impact on the industry or country. While such factors are beyond the control of companies, they should at least monitor them so they can make well-informed decisions moving forward.

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