What are the four 4 determinants of Porters theory of national competitive advantage?
What is a Porter Diamond?The Porter Diamond refers to an economic model that aids the understanding of factors that give a group, organization or country a competitive advantage over others. The theory is otherwise called the Porter Diamond Theory of National Advantage, it was developed by Michael Porter in 1990. The Proter Diamond is a model or framework that explains the competitive advantage that a nation possesses and resources or factors available to them that put them in that position. It also explains ways through which governments than improve the competitive advantage of countries in international environments. Other names for this model are "Porter's Diamond" and the "Diamond Model." Here are some vital points to note about Porter Diamond: Show
Back to:ECONOMIC ANALYSIS & MONETARY POLICY How is the Porter Diamond Used?Before the introduction of the Michael Porter diamonds model, several theories on global economics posit that the inherent attributes of a country will give it a competitive advantage in the global economic environment. These inherent attributes include natural resources, population size, land, and other primary resources. In 1990, Michael Porter explained in his book; The competitive Advantage of Nations how governments can act as stimulants for the competitive positioning of a country in the global space. The Porter Diamond model suggests ways to improve the competitive advantage of a country, these include skilled labor, a developed technology sector, fiscal policy, and government support, among others. The Importance of Factor ConditionsThe Porter Diamond is also a framework that analyzes the certain factors available to a corporate organization or business that gives it a competitive advantage over other businesses. This framework considers industry-based factors and resource-based factors that the business leverage on. These factors include organizational strategy, structure, and competition. When used to explain the competitiveness and economic advantage of a country, there are four points theorized in the Porter Diamond Model. These are:
According to Michael Porter, these four points or elements determine the competitive advantage of a country or corporation, rather than intrinsic factors such as land, natural resources, skilled Labour and Population. Related Topics
QuickMBA / Strategy / Porter's Diamond of National Advantage Porter's Diamond of National Advantage Classical theories of international trade propose that comparative advantage resides in the factor endowments that a country may be fortunate enough to inherit. Factor endowments include land, natural resources, labor, and the size of the local population. Michael E. Porter argued that a nation can create new advanced factor endowments such as skilled labor, a strong technology and knowledge base, government support, and culture. Porter used a diamond shaped diagram as the basis of a framework to illustrate the determinants of national advantage. This diamond represents the national playing field that countries establish for their industries. Porter's Diamond of National Advantage The individual points on the diamond and the diamond as a whole affect four ingredients that lead to a national comparative advantage. These ingredients are:
The points of the diamond are described as follows. I. Factor Conditions
II. Demand Conditions
III. Related and Supporting Industries
IV. Firm Strategy, Structure, and Rivalry
The Diamond as a System
Government's Role The role of government in the model is to:
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:
Recommended Reading Porter, Michael E., The Competitive Advantage of Nations In this 800+ page work, Michael Porter introduces his diamond of national advantage and its self-reinforcing nature. He then applies the diamond to examples in both manufacturing and service industries, and uses the value chain to explain the growing role of services. The book concludes with implications on company strategy and national agendas. QuickMBA / Strategy / Porters Diamond of National Advantage Home | Site Map | About | Contact | Privacy | Reprints | User Agreement The articles on this website are copyrighted material and may not be reproduced, What are the 4 aspects of the diamond of national advantage?Understanding the National Diamond
The four categories are firm strategy, structure, and rivalry; related and supporting industries; demand conditions; and factor conditions. His model also recognizes the impact of the institutional environment on competitiveness.
What are the elements of national competitive advantage?The framework identifies six national-level factors that underpin firm-level competitive advantage: four core elements (factor endowments, demand, supporting industries, and firm rivalry) and two additional elements (government and chance).
What does Michael Porter mean by the term national competitive advantage?Michael Porter's Diamond Model (also known as the Theory of National Competitive Advantage of Industries) is a diamond-shaped framework that focuses on explaining why certain industries within a particular nation are competitive internationally, whereas others might not.
Which element is included in Porter's diamond model of national advantage?Which element is included in Porter's diamond model of national advantage? the existence of similar preferences and demands among countries with similar income levels.
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