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Porter's Diamond of National Advantage

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Porter's Diamond of National Advantage (Part I)
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.

The complete Porter’s Diamond system (Porter, 1998, pg 127)

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 availability of resources and skills,
Information that firms use to decide which opportunities to pursue with those resources and skills,
The goals of individuals in companies,
The pressure on companies to innovate and invest.
The points of the diamond are described as follows:

I. 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.
II. 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.
III. 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.
IV. 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.

Case study 1: Assessing International Success and National Competitive Environment of Shrimp Industries of India and Thailand with Porter's Diamond Model and Flexibility Theory

India and Thailand are among the top five countries in global shrimp production and its aquaculture. Thailand and India are also among the top three exporters of shrimp in global trade. The two main varieties driving shrimp exports in global trade are P. vannamei (Whiteleg shrimp) and P. monodon (Black tiger shrimp).

•Porter's (1990) thesis on ‘Competitive Advantage of Nations’ is based on the proposition that ‘high intensity domestic competition breeds international success’.

Industry or sectoral competitiveness refers to the extent to which the business sector offers potential for growth. It would also be the collective ability of the firms in a sector to compete internationally (Momaya, 2000). Here the environment of the industry becomes crucial in the process of building competitiveness. Porter's (1980, 1986b, and 1990) works over the years have provided valuable insights into factors shaping competitiveness of industries. Some terminologies Applied synonymously with competitiveness are- comparative advantage, competitive advantage, core competencies etc. (Banwet et al, 2003). However, despite its world wide acceptance and applications, national level competitiveness and application processes have been challenged at various times (Krugman, 1998: Lall, 2001).

'National Environment', according to Porter, is the base of the Diamond Model (also called the "Home Diamond"). It is critical to analyze the conditions in the context of this Home Diamond, to gain aright perspective of scenario for planning and future action. Momaya (2001), from an exhaustive study conducted on Indian industries, learnt that to evaluate competitiveness, an understanding of the context is a prerequisite. These include scope, structure and the value/supply chain of an industry. In Porter's model, the competitiveness of an industry is determined by four major economic attributes and these are further questioned on various aspects. Some of these questions corresponding to the factors are as follows:

i. Firm level strategy, structure and internal rivalries
a. Does style of management and prevailing types of organizational structures in nations match industry needs?
b. What types of strategies exploit national organizations? ii. Advanced factor conditions such as technology, skilled labor and advanced capital
a. Does the nation have particularly advanced or appropriate factors of production? In what segments? Through what strategies?
b. Do nations have superior factors creating mechanisms in the industry, like specialized university research programs, outstanding educational institutions? iii. Demand conditions- a sophisticated customer base demanding high quality goods and services
a. Are the nation's buyers for industry products most sophisticated or demanding?
Does the nation have unusual needs in the industry that are significantly but will likely be ignored elsewhere? iv. Presence of related and supporting industries - providing vital value-component in the total value addition chain
a. Does the nation have world class supplier industries? For what segments?
b. Are there strong positions in important related industries?

The crucial linking factor that spins off greater performance for country level and firm level competitiveness is industry level competitiveness. Industry competitiveness refers to the extent to which the business sector offers potential for growth through a robust national environment.

Porter's Diamond Model is built around the 'national environment' consisting of four elements - firm strategy, structure and internal rivalries, factor conditions, demand conditions and related or supporting industries.

Indian Shrimp Industry on Porter's Framework
India occupies one of the top five positions in the world shrimp production. In aquaculture it is the second largest aquaculture producer after China. Aquaculture contributes 21.56 % by volume and 49.76 % by value of total seafood exports whereas fanned shrimp contributes 76 % by volume and 83 % by value of shrimp exports (Rajitha et al., 2006). Although India has over 1.2 million hectares available for shrimp farming the current exploitation is only 16% of this. 90% of the shrimp farms in the country are owned by small and marginal farmers. The major species cultured is the black tiger shrimp (Penaeus monodon).Frozen shrimp is the largest item in the export basket accounting for nearly 58% of the total value of exports, of which the share of cultured shrimp is above 80 %( MPEDA, 2006).

1. Firm Strategy, Structure and Rivalry
The Indian shrimp industry is comprised of farmers, processors and exporters and allied industry players. There are over 290 shrimp hatcheries each with an average production capacity of 30 million and 30 feed mills with a total annual installed capacity of 250,000 metric tonnes. India produces about 143,000 metric tonnes of shrimp from a brackish water area of about 140,000 hectares (MPEDA. 2006). Commercial shrimp fanning in India started only in the mid-1980s and cultured shrimp farming witnessed rapid growth through 1990s (Kumar et al, 2004}, The major species cultured is the black tiger shrimp (Penaeus monodon).
More than 91% of the aqua fanners own less than 2.0 ha water area. Farms below 5.0 ha occupy 65% of the total area of shrimp farms in the country. Only 10 among 500 leading companies in India are involved in aquaculture. These 10 corporate companies have taken up 1898 ha of land, of which only 758 ha has been developed into shrimp farms. This constitutes Just 0.54 % of the total water spread area of 140,936 ha developed for shrimp culture in the country. Compared to 92591 farmers involved in shrimp farming, the companies constitute barely 0.03 % of the total farms. The small farmer many times is not able to realize the required quality standards of the importing countries with his limited resources and uneconomic holding size (MPEDA, 2006).
On the processing front, there could be either a processor-cum-ex porter or an exporter only. Except for the handful of large players, the industry has mostly marginal players. Unlike Thailand, the Indian shrimp industry has not seen much of an interest by foreign investors. Most of the companies are family owned inherited businesses except few of those like the ITC, Hindustan Lever Ltd etc. The 'situation' presented here has evolved through growth that has happened over the last few decades.
Four respondents except one (of the two government representatives) provided negatives, as the majority felt that in India the sector warranted better conditions for a flexible competitive growth. They felt that these conditions tend to derail strategic interventions as organized industry presence (corporate) in the sector is limited and there is a major component comprising the smaller players. Average holdings are small and fragmented making policy and scheme implementations difficult.

2. Factor Conditions
India has a reasonably well-developed processing infrastructure comprising 369 freezing plants spread over the entire coastal belt. Processing of fish in the country is mainly export - driven. However, testing infrastructure in India still needs to develop so that India can maintain quality lead in its processing facilities.
The labor available in India is one of the cheapest among the shrimp producing countries and is helpful in bringing down the production costs considerably. The shrimp processing industry employs women as the processes of cutting and peeling is best done by the deft skilful hands of women workers. A majority of these women workers are not professionally trained but learn the job hands on, once they are brought into factories, Most of what these laborers perform is through hands-on training.
There is a large pool of educational and research and development organizations like the Central Institute of Fisheries Education (CIFE), Central Institute of Brackish- Water Aquaculture (CIBA), Central Inland Fisheries Research Institute (CIFRI), Central Institute of Freshwater Aquaculture (CIFA) etc. Under the Ministry of Commerce and Industries - the Marine Products Export Development Authority (MPEDA) facilitates export development and market access opportunities for the companies. The Seafood Exporters' Association of India, with its various chapters in major fishing regions of the country, has been playing a very active role in facilitating the build up of the shrimp industry in India and in connecting it to the markets.
The factor conditions render a flexible scenario as two of the most important factors - labor and research and development support- required for the sector's competitive progress in terms of cost and knowledge advancement are present in good measure. Four of the respondents gave positive rating to the factor from flexibility perspective while one respondent rated this element negative.

3. Demand Conditions
According to Porter (1990) a home base with buyers, who have an international outlook can be demanding. They are sophisticated and their requirements are more stringent. They will be quality conscious and would want the product to be adhering to globally formalized standards and norms.
In India, this model does not exist in marine exports, as well, like most of the export businesses. This lack of a sophisticated demand base in home country could be considered one of the major reasons why India has not been able to move up the value chain.
Production for exports and domestic markets are in two different systems and only export products go through international norms. The domestic market for shrimps is not very huge. Not much goes into domestic consumption. There are no exacting standards in the domestic market unlike the foreign markets like Japan, US or EU. The quality of the shrimp in the local market is mostly assessed by the freshness of the item. A fresh looking shrimp is considered to be good quality. Scare of intestinal infections caused by the regular consumption of shrimps also has discouraged the domestic market from regular buying of shrimp for home consumption. Further, the shrimp prices in local markets are also high compared to the other locally available varieties. Hence shrimp is not bought by the average middle class family on a regular basis.
Shrimp exports from India are in bulk quantities to customers abroad and this is repacked and sold in most of the destination markets like USA, Europe and Japan. Product varieties in processed shrimp are not as diverse as its leading competitor like Thailand and Indian shrimp exports is still done largely in blocks or individually quick frozen (IQF) bulk packaging. There is a wide difference in exports in bulk packaging and retail packaging. Exporting in bulk form is considered to be a less stringent process than exporting in retail packs, as the exporter becomes directly accountable for a product in retail packs. India is the second largest exporter of shrimps in the world after Thailand but unlike Thailand. Indian shrimps have not been able to develop its own brands in the global markets.
Therefore, the absence of a demanding local market coupled with bulk export option leaves the exporter with little exposure to compete in international conditions and limited opportunities to gain an understanding of the challenges in an international competition. The exporter in this condition only follows certain fundamental regulations set for the exports, losing opportunities to spread his business globally and learn new facets of international trade. Only one respondent from the government marked the demand conditions positive assessing the situation presented by demand conditions in context of flexibility theory. The rest of the four respondents together rated this factor as negative indicating a negatively flexible situation.

4. Related and Supporting Industries
The increase in aquaculture practices has led to an automatic increase in the demand for shrimp feed in the industry. This has also led to the establishment of several state-of-the-art shrimp hatcheries. There are more than 260 shrimp hatcheries in India. Shrimp feeds make for 50% of the production cost in shrimp culture (Goss et al. 2000).A backward integration, wherein the shrimp feeds business is enjoined with the shrimp fanner's business, can be advantageous to the farmer and can help him gain control over his production costs. India has more than 30 shrimp feed mills.
Several of the Indian shrimp feed makers like Waterbase Ltd, Avanti, Godrej Agrovet etc are suppliers of shrimp feed to the Indian companies and farmers involved in shrimp culture. Realizing the potential of shrimp feed business in India, some foreign investments through the Japanese company Higashi is already in India and in mid 2006 Thailand based Charoen Pokphand (CP) group, announced its investment plans on shrimp feeds in India. Of the five respondents who rated the impact of this element on the flexibility conditions in the system, three felt that the conditions are positive while two (industry representatives) felt that the conditions were still negative.

Porter considered 'government' an option in Diamond Analysis. But the role of government in the national environment of a developing country cannot be discounted.

5. Government Intervention
The government intervention and support for the shrimp industry, especially exports, comes majorly through the Marine Products Export Development Authority (MPEDA) under the Ministry of Commerce and Industries of Government of India and some of the marine research institutions mentioned earlier. Export related policy decisions are recommended majorly by MPEDA to the Ministry of Commerce of the central government and policy decisions taken are implemented through MPEDA. In 1979, MPEDA was mandated to develop shrimp/prawn culture as an alternative for generating additional raw material for augmenting exports from India. MPEDA plans, popularizes and implements various schemes for promotion of export-oriented aquaculture in the country. The body also acts as a liaison agency between various stake holders in shrimp/ prawn culture such as banks and other financial Institutions; insurance agencies etc; state fisheries departments; research institutions and the farmers and entrepreneurs etc.
This element received positive ratings for flexibility from four respondents and one negative from one industry member. Interviews with industry revealed the need for greater intervention to smoothen industry operations.

Thai Shrimp Industry on Porter's Framework
Thailand is one of the leading producers in the world of farmed shrimp since 1993. Thailand has developed its production and marketing of shrimps to deliver consistent performance in shrimp exports globally. The country has been successful in transforming shrimp exports from a high cost luxury product into low cost competitive product. Internal factors like productivity growth, price, overall efficiency etc and external factors like elasticity of demand and trade policies in importing countries have supported the Thai shrimp .sector in managing its export competitiveness (Ongsritrakul and Hubbard, 1996).
Black tiger has been the most common item, while others include white shrimp, yellow shrimp, banana prawn, green tiger prawn, jinga prawn etc. Frozen shrimps generate export revenues of more than 1.5 billion baht per year, ranking Thailand among the top 10 exporting countries in the world. The country has a market share of 27 percent in world markets. The EU, the US, and Japan are major importing countries with their import market shares being 33, 29, and 22 percent respectively (Nidhiprabha, 2002).

1. Firm Strategy, Structure and Rivalry
About 80.0 % of the shrimp farms are owned by small-scale farmers, operating 1-2 ponds, each ranging in size from 0.16 - 1.6 ha. The Government of Thailand provides assistance to these farmers by developing sea water irrigation system (SIS) which brings in clean sea water for individual farms to tap. Extensive, semi-intensive and intensive types of farming systems are practiced in the country (Worldftshcenter, 2002).The industry is dominated by ten big companies whose production is export oriented. The Thai shrimp industry has farms (approximately 20,000) and the main market like Maha Chai that provide the processing material for the plants. Due to rapid expansion of shrimp farming, the production of cultured shrimp which was only a little over 10,000 metric tonnes in 1982 increased to 2,60,000 metric tonnes in 2003. Figure 3 indicates the production of shrimp in Thailand both from capture and culture source between 1992 and 2003.
Industry leader CP is the market leader practicing vertical integration. CP manages its shrimp business right from shrimp feeds to hatcheries and has a control on its complete supply chain. This has not only provided CP with an advantageous position but has also provided the smaller players to integrate into the business model set up by CP. Much of the research and development work happening in Thailand in the aquaculture is on shrimp farming and the shrimp farmers here are technically supported by councils and research bodies set up in collaborative capacities by leading industry players and the government. Technology has been one of the driving factors for the growth of the Thai shrimp sector and the CP has led the industry in technology transfers, investing and managing programmes and projects (Goss et al, 2000).
All the respondents gave a positive rating to this factor as they felt the overall conditions provided space for generating continua of intervention by strategists. It is this flexibility that is sought in a system where the inputs have to bring in the desired results in a certain order.

2. Factor Conditions
The labor available for aqua culture fanning in Thailand is cheap and has acquired skills through training and experience. Other advantages of Thailand include good climatic conditions, suitable land, an abundance of good quality water with stable temperatures etc. (Ongsritrakul and Hubbard. l996}.The Thai shrimp industry is supported on the research side by several of its bodies like National Institute of Coastal Aquaculture, National Inland Fisheries Institute, Aquatic Animal Health Research Institute, Fishery Technological Development Institute etc.
Thailand has maintained consistency in quality without being costly as a supplier at the same time meeting international standards and customer requirements. The low profit margins and highly competitive market structure has made the Thai shrimp processing and exporting industry network acutely quality conscious (Kritchanchai, 2004), Each level of the industry has been therefore flexible and adaptive to upgrading and adapting itself to match global regulatory requirements and standards for food exports focusing on quality and food safety (Rohitratana and Boon-itt, 2001). Remaining sensitive to market demands made them realize that to counter cheap frozen shrimps imports from other countries from affecting their market shares, value addition to their products would be an effective strategic response. Thus high value added new products such as shrimp sushi, shrimp tempura. cocktail shrimps, and shrimp spring rolls have been developed as a successful product range by the Thai shrimp exporters (Nidhiprabha, 2002).
The characteristic cheap labor available in the Asian markets is applicable to Thai marine sector as well. On this advantage, Thailand and India both have access to cheap labor, which helps bring down the production costs. The supporting institutional frameworks too remain the same way for Thailand as in India. There is an actively linked network that connects the industry with several of the institutions. On the basis of flexibility, the respondent panel gave similar ratings to this element as was given to India. The positive ratings were four and negative rating was one.

3. Demand Conditions
While farmed shrimp (black tiger and vannamei) from Thailand are mainly exported to developed markets (USA, Japan and Europe), local consumption and regional trade are also increasing. Live, fresh, frozen and value-added shrimp products are widely sold in supermarkets in this region and often used as promotion item. Increasing supply (mainly of vannamei), better distribution, increasing consumer income, wider usage in the catering sector and increasing trade barriers (e.g. anti-dumping, duty, safety and antibiotic issues) in developed markets are the main factors behind the growing domestic market for farmed shrimp. The region is also becoming important for those processor-exporters in the region who import shrimp as a raw material for processing and further process and export. The respondent panel was divided on the impact of this element on the Thai industry's flexibility conditions enabling competitiveness in the export channels. They felt there is need for an increased amount of evidence on this dimension. The rating results were three positives and two negatives.

4. Related and Supporting Industries
The shrimp feed industry also forms part of the shrimp export network. The cost of the feed is almost 50% of the production costs (Goss et al, 2000) and hence is a major cause of concern for the producer-exporters. This condition has induced certain leading Thai companies in shrimp exports like CP to establish themselves across the supply chain with a role in every level of processing and ensuring a complete backward and forward linkage system. This has provided CP a strategic flexibility in its operations and has yielded a monopolistic market advantage in the feed and processor network (Nidhiprabha. 2002).
The panel was united in their response and convinced that the support provided by the actors in shrimp feed industry and other allied sectors of Thai shrimp industry created a partnership allowing real time dynamics for competitive action. All the panel members gave a positive rating to this element.

5. Government Interventions
The interventions whether on its own or with industry co-operation on various network components, although have been made at intervals, they have become a constant support feature from the government to the shrimp export industry of Thailand. In the period between 1992 and 1996, one of Thai government's interventions came through a boost up plan for the shrimp export industry by introducing the Seventh National Economic and Social Development Plan (Ongsritrakul and Hubbard. 1996). Realizing the need for GMO/Non-GMO product separation in the EU, five parties- Department of Fisheries, Thai Marine Shrimp Farmers Association, Thai- Frozen Foods Association, Thai Food Processor's Association, and Aqua-culture Business Club representing various stakeholders in shrimp export business in Thailand developed a code of conduct in the year 1999. This covered data collection, training, site selection, shrimp health management, waste management, and application of drugs. The exercise was critical and hence effectively addressed import consumer concerns and also enabled continued market access to the EU.
Creative action from actors like developing country governments in a flexibility assessment scenario is rarely recorded. In a marked deviation from this situation are the interventions made by Thai government. The Thai government is noted for the promotion of its food industry linking it with the international market. Globally promoting the "Kitchens of the World" tag on Thai agrifood products, the government developed a national branding system creating exclusivity around the food from Thailand among international consumers. Four respondents of the panel gave positive rating while one respondent from the government gave a negative rating on flexibility displayed by the element.

Discussion
The assessment of the shrimp export industries of India and Thailand, presents competitive environments for both countries. The Model provides an overall understanding of the national competitive environments in which the shrimp export industries of both nations thrive. "International Success" of shrimp exports business and the flexibilities offered by each of its components in both countries are revealed in the analysis. Thailand has gained an advantage over India through certain outstanding differences that have contributed to its success in the world market. These are mapped and brought out under the various elements of Porter's Diamond Model. The results can be discussed under three major areas where Indian scenario require attention - domestic market and its influence, presence of multinational firms and role played by the respective national governments.

The Domestic Market Influence
The domestic market in India is neither very challenging nor well established in its demand for primary shrimp produce and value-added shrimp products. On the other hand, the Thai domestic market for shrimp is comparatively progressive and there is an increased level of local awareness and demand for shrimp based value-added products. The domestic consumer demand for product variety and quality has influenced the production systems of Thailand.

Presence of Multinational Firms
The presence of some of the leading multinational firms from Europe and other developed countries has led to high investments in developing physical infrastructure, market structure, business development etc in the Thai shrimp industry. Multinational companies in shrimp sector are conspicuous by their absence in India and this is further reflected in lack of investments in physical infrastructure, state of the art facilities, processing systems etc in the shrimp processing and export industry. On the contrary, foreign investments have spurred competition in domestic industry and have induced local leading companies like CP become more competitive and innovative, at the same time raising the general performance standards. Quality standards are followed with exacting routine and this has established an exclusivity for Thai shrimp products in world markets.

Role of National Government
The role of Thailand's national government is seen to be more collaborative as compared to that of its Indian counterpart. Programmes implemented by the Thai government working with the industry at interactive levels have yielded positive results. The focus of the Thai government to push this high revenue earning food industry to higher productivity and income earning levels and has brought commitment and sustained efforts from all stakeholders in the industry.
The above mentioned factors have played a major role in contributing to the competitive positioning and international success of the Thai shrimp industry as a quality player in the global shrimp market. While this is an encouraging scenario for Thailand, the results of the export trend analysis {Compounded Annual Growth Rate-(CAGR)| conducted in this paper for the two countries, also present a different perspective. India has maintained a positive growth as against the negative trend shown by Thailand in shrimp exports assessed for the period 1999 to 2003. The trend raises questions on the rationale of international success and its driving national environment factors working for India.
The findings of the Diamond model analysis of the national environment are further employed to understand the scenario from flexibility point of view. For this purpose, Nominal Group Technique employing a panel of experts drawn from industry, government and research area was used. The results are presented in Table 5. The utility of flexibility theory in a national industry competitiveness study is very much relevant as both theories deal with dynamics of situational elements.…...

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...Porter’s Diamond Theory 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. Porter believes that the following factors can decide a country’s competitiveness:- * 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. * 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 than those of competitors. * Related and supporting industries can produce inputs that 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. * 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. Apart from the above mentioned......

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Porter's Theory

...RELATE M. PORTER’S DIAMOND OF NATIONAL ADVANTAGE TO INTERNATIONAL BUSINESS The national home base of an organisation plays an important role in shaping the extent to which it is likely to achieve advantage on a global scale. This paper seeks to identify how national competition can help businesses compete globally, hence relating M. Porter’s ‘diamond of national advantage’ to international business. International Business comprises all commercial transactions (private and governmental, sales, investments, logistics, and transportation) that take place between two or more regions, countries and nations beyond their political boundaries. Usually, private companies undertake such transactions for profit; governments undertake them for profit and for political reasons. It refers to all those business activities which involve cross border transactions of goods, services, resources between two or more nations. The Diamond Model of M. Porter for the competitive advantage of Nations, offer a model that can help understand the comparative position of a nation in global competition, PORTER says that sustained industrial growth has hardly ever been built on basic inherited factors. Abundance of such factors may actually undermine competitive advantage! He introduces a concept called "clusters" or groups of interconnected firms, suppliers, related industries, and institutions that arise in certain locations. PORTER argued that a nation can create new advanced factor endowments...

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Does the Land of Venture Capital Have a National Competitive Advantage for Private Equity?

...------------------------------------------------- Assignment 1 Does the land of Venture Capital have a national competitive advantage for Private Equity? Checcarelli Betti Francesco Hawlasewicz Maja Janssen Wim Kees Irina Müller Doing Business in Emerging Markets Fall Term 2014 04. November 2014 Abstract This assignment conducts an analysis of Israel using Porter’s Diamond model with a focus on the Private Equity industry. The aim is to understand if Israel has a national competitive advantage for the PE industry. Factor conditions National level. The country’s natural endowment is rather weak, forcing the nation to focus on knowledge-based industries (i.e. software, biotech, etc…) rather than being heavily dependent on natural resources. The ongoing hostilities with its neighbouring countries shaped the economic landscape, having a positive effect on Israel’s defence industry, which in turn provided a foundation for wide parts of the country’s high-tech industries. In addition, the near east led to even closer collaboration between Israel and the US, which is the top foreign investot in Israel, accounting $19.7 billion of the $74.4 billion in FDI in 2012, or 26.5% of the total (Kumar et al., 2009, p. 11). PE activity. These preconditions, supported by a strong education system within science and engineering-related subjects, helped Israel to build up one of the country’s most important strategic assets: specialized know-how and......

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Porters Diamond Model

...Introduction----- The diamond model is an economics model developed by Michael Porter in his book The Competitive Advantage of Nations. In the mid-1980s, Professor Michael Porter of Harvard Business School developed the model to assess the competitiveness of regions, states and nations. It’s a model that attempts to explain the competitive advantage some nations or groups have due to certain factors available to them. Porter used a diamond shaped diagram to illustrate the determinants of national advantage. That’s why it is called the Porter’s diamond model. The body -------- Now we will use some examples to illustrate the determinants of national advantages. For example:- • Germany is associated with good car making • Japan is strong with respect to micro-electronics and cameras. • France is strong with respect to wine. • The UK (at least until recently!) was associated with a strong financial services industry The chart --- Factor conditions: Some countries enjoy natural advantages. For example, France starts with an advantage in the wine industry because of its climate and soil. Finland, however, is never likely to be good at producing wine. Germany has an abundance of iron ore, ready to be used in the car and other industries. Climate and natural resources are known as basic factors. In addition, countries can develop advanced factors such as their transport infrastructure, telecommunications, and educational system. Demand conditions: The first......

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Porters National Diamond Analysis

...Part 1: Porters National Diamond Analysis 1. Introduction The purpose of this report is to evaluate the attractiveness of Peruvian wine industry. In this report, we will discover the overall competitiveness and investment attractiveness of Peruvian wine industry. Porter’s National Diamond Analysis will be used as a tool to identify the opportunities and threats of Peruvian wine industry. Two-market entry strategy will be identified and recommended. The advantages and limitations of both strategies will also be discussed in this report. Peru is located in the west of South America, and has borders with Ecuador, Colombia, Brazil, Bolivia and Chile (peru.travel) Wine industry from Peru was brought from Spain after its conquest. (Ayala) 1. 2. Factor conditions 1. 2.1. Physical resources Peru soils are nearly level to steep. They are on drumlins and sloping to steep areas of glaciated uplands. Slope ranges from 0 to 35 percent. The soils formed in dense, loamy glacial till of Wisconsin age that is derived mainly from mica schist, granite, and phyllite. Peru soils are moderately well drained. Permeability is moderate in the solum and moderately slow or slow in the substratum. The climate is humid and cool temperate. Mean annual rainfall ranges from 30 to 50 inches and mean annual air temperature ranges from 40 to 47 degrees Fahrenheit. The frost-free season ranges from 90 to 160 days.(National Cooperative Soil Survey , 2013) The high relief and steep slopes of the streams...

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Porter and National Competitive Advantage

...- “The contribution by Porter (1990) on the competitive advantage of nations has led to an extensive discussion among academics and practitioners on the sources of international competitiveness (Grant, 1991; Gray, 1991). However, in order to understand why so much emphasis is placed on the diamond framework in the management literature, this essay will discuss Porter’s concept of the Diamond and the factors that contribute to the development of national competitive advantage. This paper will begin with a theoretical approach followed by the reception of different authors and schools of thoughts who disagreed with his management thinking, and then goes on to consider empirical issues which have arisen subsequently, followed by a conclusion.” Theoretical Discussions (explain the 'main theory' [such as 'Late/Early industrialization', 'Managerial enterprise', 'Weber's theory about impacts of culture'] in this question) - “Porter’s theory of national competitive advantage is based upon a study of the characteristics of the national environment which identifies four sets of variables, and an additional two, which influences a company’s ability to establish and maintain competitive advantage within international markets. These interacting determinants are: factor conditions; demand conditions; related and supporting industries; and firm strategy, structure and rivalry and form what Porter refers to as the “national diamond.” The four main determinants can also be understood as......

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How Might Porter’s Diamond Explain Why Some Locations Produce Firms with Sustained Competitive Advantages in Some Industries More Than Others?

...How might Porter’s Diamond explain why some locations produce firms with sustained competitive advantages in some industries more than others? Answer with reference to examples from at least two different industrial sectors. Answer. Porter’s diamond model is a model that can help understand competitive position of location in global competition that suggest a inherent reason why some firm within location are more competitive that other on a global scale. The argument is that the local are provided organization by specific factor, which created more potential competitive advantage for country or region. The Porter's model includes 4 drivers of local advantage, which are shortly described below: 1. Local factor conditions A company in local is exploited by factor conditions. Factor conditions can be seen as advantage factors such as workforce shortage, as a factor potentially strengthening competitiveness, this factor may heighten companies' focus on automation and zero defects. For example, in analyzing of film production industry in the Hollywood, has pointed out the local skilled labor, in the area. Also, resource constraints may encourage development of substitute capabilities; Japan's relative lack of raw materials has reduced and zero defect manufacturing. 2. Local demand conditions Focusing on the domestic market provide the primary driver of growth, innovation and quality improvement. The strong domestic market is stimulates by stat up the to a slightly......

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Porter’s Diamond of National Competitive Advantage

...evaluate Porter’s Diamond of National Competitive Advantage as an aid to understanding national competitiveness. Table of Contents Table of Contents 2 1. The diamond model by Michael Porter 3 1.1 Introduction 3 1.2 Diamond model Theory 4 1.2.1 Factor Condition 4 1.2.2 Demand conditions 5 1.2.3 Firm strategy, structure and rivalry 5 1.2.4 Related and supported industries 6 1.2.5 The role of Government 6 1.3 Criticism of the framework 7 1.4 Practical Example 7 1.5 Conclusion 8 1 2 3 4 5 6 7 8 9 1. The diamond model by Michael Porter 1 1.1 Introduction According to Recklies (2001), increasingly corporate strategies have to be seen in global context and even if an organization does not plan to import or to export has to look at an international business environment, in which actions of competitors, buyers, sellers, new entrants of providers of substitutes may influence the domestic market and information technology has been reinforcing this trend. The classical models and theories related to international trade before Michael Porter’s Diamond theory, mainly proposed that the comparative advantage resides in the factors endowments that a country may be fortunate enough to inherit and these factors mainly consisted of land, natural resources, labour and the size of the local population but Porter argued though his diamond......

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