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B300 / part 2: TMA02 Michael Porter’s ‘diamond’ of National Competitive Advantage/ Policy Module
Name: Khitam B. Yamani ID: 051284
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B300 / part 2: TMA02 Michael Porter’s ‘diamond’ of National Competitive Advantage/ Policy Module
Name: Khitam B. Yamani ID: 051284
Table of Contents:
Introduction
Conclusion:
References:
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B300 / part 2: TMA02 Michael Porter’s ‘diamond’ of National Competitive Advantage/ Policy Module
Name: Khitam B. Yamani ID: 051284
Introduction
A nation’s competitiveness depends on the capacity of its industries to
continually innovate and upgrade. Companies achieve competitive
advantage though acts of innovation, as it’s a way to succeed in the
international markets, and it can sustain it only through relentless
improvement. He presented more on how a firm can position itself in the
market and how it can be different from market competitors. Porter
presented his Diamond model which focuses on the determinants of
national advantage and it is based on four country-specific “determinants”
and variables; like the role of government. Porter’s four determinants and
external forces interact in the “diamond” of competitive advantage, with
the nature of a country’s international competitiveness depending upon
the type and quality of these interactions. The four determinants for a
nation shape the environment in which local firm compete and promote or
impede the creation of competitive conditions,” The four determinants of
Porter’s Diamond model are:
(Vivek Suneja, 2002 p. 113/ by M. Porter 1990) Policy module.
Firm Strategy, Structure and Rivalry: The domestic rivalry of firms and the
conditions governing how companies are created, organized and
managed, such as the ways in which firms are managed and choose to
compete; the goals that companies seek to attain as well as the
motivations of their employees and managers; and the amount of
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B300 / part 2: TMA02 Michael Porter’s ‘diamond’ of National Competitive Advantage/ Policy Module
Name: Khitam B. Yamani ID: 051284
Porter stresses that the “diamond” factors form a system, that is, a set of
interdependent parts that together form a unitary whole so that
weaknesses in one part of the system can undermine the whole. There are
even synergies from the clustering of suppliers, buyers and rivals in the
home country, mainly in promoting efficiencies, specialization and
innovation. That there are inter-dependencies cannot be denied but the
importance for any particular industry would have to be established
empirically; In addition to the other influencing factors mentioned by
Porter. “Much government policy aimed at ‘revitalizing’ industry has failed.
It is doomed because it does not address the determinants of competitive
advantage and is therefore not directed at the true cause of decline”.
Porter, M. E., 1990, Competitive Advantage of Nations, New York: Free
Press.
The forces that affect the competitiveness of a nation, but are not direct
determinants; are the firm chance; as caused by developments such as
new inventions; political decisions by foreign government; wars; significant
shift in world financial markets or exchange rates; discontinuities in input
costs such as oil shocks; surges in world or region demand; and major
technological breakthroughs, in addition to the various roles of
government including subsidies; education policies; actions toward capital
markets; the establishment of local product standards and regulations; the
purchase of goods and service; tax laws; and antitrust regulation. Internet
search, Michael porter's competitive advantage revisited(
http://www.busmgt.ulster.ac.uk/modules/bmg900m1/OShaughnessy.pdf)
date of access 23.12.2009.
+ (Vivek Suneja, 2002 p. 139/ by M. Porter 1990) Policy module.
Porter says that “most theories of trade look solely at cost, treating quality
and differentiated products in a footnote. A new theory must reflect a rich
conception of competition that includes segmented markets, differentiated
products, technology differences and economies of scale”. He argues that
“a new theory must explain why firms from particular nations choose
better strategies than those from others competing in particular
industries”. He believes that “much traditional thinking has embodied an
essentially static view focusing on cash efficiency due to factor scale
advantages”. His sharpest area of stress is the importance of
competitiveness, a theme he repeatedly returns to, and he thinks that “a
new theory must make improvement and innovation in methods and
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B300 / part 2: TMA02 Michael Porter’s ‘diamond’ of National Competitive Advantage/ Policy Module
Name: Khitam B. Yamani ID: 051284
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B300 / part 2: TMA02 Michael Porter’s ‘diamond’ of National Competitive Advantage/ Policy Module
Name: Khitam B. Yamani ID: 051284
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B300 / part 2: TMA02 Michael Porter’s ‘diamond’ of National Competitive Advantage/ Policy Module
Name: Khitam B. Yamani ID: 051284
Conclusion:
After reviewing the above report we can conclude that for a country to
sustain a competitive advantage in a particular industry sector it needs
dynamic advantage: firms must extend the basis of their competitive
advantage by innovation and upgrading. Government and firms change to
innovate and upgrade policies and strategies have embedded into the four
key diamonds in a complete diamond model. Overall, these four diamonds
make a complete picture on the national competitiveness measurements
and hence using them as strengthening factors, like taking production
factors, demand conditions, related and supporting industries, and
business strategy, structure and rivalry four diamond altogether to do an
analysis for firm performance.
The dynamic conditions that influence innovation and the upgrading are
far more important than initial resource endowments in determining
national patterns of competitiveness. And national competitiveness, we
need to focus upon firm performance. The national environment role is to
provide a context within which firms develop their identity, resources,
capabilities, and managerial styles.
Vivek Suneja, 2002 p. 139/ by M. Porter 1990) Policy module.
Overall, the global diamonds from both domestic and international
variables, including factor conditions, demand conditions, related and
supporting industries conditions, and firm strategy, structure and rivalry
conditions, all demonstrate a superior performance of national
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B300 / part 2: TMA02 Michael Porter’s ‘diamond’ of National Competitive Advantage/ Policy Module
Name: Khitam B. Yamani ID: 051284
competitiveness.
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B300 / part 2: TMA02 Michael Porter’s ‘diamond’ of National Competitive Advantage/ Policy Module
Name: Khitam B. Yamani ID: 051284
The above diagram (of Porter Diamond Model) shows the determinants of
national competitive advantage and the interaction between them
with the external forces influence
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B300 / part 2: TMA02 Michael Porter’s ‘diamond’ of National Competitive Advantage/ Policy Module
Name: Khitam B. Yamani ID: 051284
C r e a t e p r e s s u r e s f o r in n o v a t io n s
E n f o r c e s tr ic t p r o d u c t , s a fe t y a n d
S e e k o u t t h e m o s t c a p a b le e n v ir o n m e n t a l s t a n d a r d s
c o m p e t ito r s a s m o t iv a to r s
E s t a b l i s h e a r l y - w a r n in g s y s t e m s F o c u s o n s p e c i a l i z e d f a c t o r c r e a t io n
The com pany agenda
Im p r o v e t h e n a t io n a l d i a m o n d
W e lc o m e d o m e s t ic r i v a l r y
T h e r o le o f g o v e r n m e n t
G l o b a li z e t o t a p s e le c t i v e a d v a t a g e s N a tio n s G a in
in o th e r n a t io n s
c o m p e titiv e
U s e a l li a n c e o n ly s e le c t iv e l y a d v a n ta g e b y :
A v o i d i n t e r v e n i n g in f a c t o r a n d
c u rre n c y m a rk e ts
L o c a te th e h o m e b a s e to s u p p o rt
c o m p e t i t iv e a d v a n t a g e T h e r o le o f le a d e r s h ip S h a r p l y l im it d i r e c t c o o p e r a t i o n
a m o n g i n d u s t r y r iv a l s
B e l i e v e in c h a n g e , e n e r g iz e
o r g a n i z a t i o n t o i n n o v a t e c o n t in u o u s ly P r o m o t e g o a l s t h a t l e a d t o s u s t a in e d
in v e s t m e n t
R e c o g n iz e im p o r t a n c e o f h o m e
c o u n t r y a s i n t e g r a l t o t h e i r c o m p e t it i v e D e r e g u la t e c o m p e t itio n
s u c c e s s a n d w o r k t o u p g r a d e it
E n f o r c e s t r o n g d o m e s tic a n t itr u s t
R e c o g n iz e t h e n e e d f o r p r e s s u r e a n d p o li c i e s
c h a ll e n g e .
R e je c t m a n a g e d t r a d e
A S p r a y d ia g r a m s h o w in g h o w n a t io n s c a n g a in c o m p e t it iv e a d v a n t a g e
( a c c o r d in g t o P o r t e r D ia m o n d M o d e l)
References:-
− Mazzucato, Mariana, (2002), Business Behavior in a Changing World,
Strategy for Business, London, The Open University, SAGE
− Vivek, Suneja, (2002), Business Behavior in a changing World, Policy Issues
for Business. London The Open University, SAGE
− B300 CD Audio
− Porter, M. E., 1990, Competitive Advantage of Nations, New York: Free
Press.
− Internet search, Michael porter's competitive advantage revisited(
http://www.busmgt.ulster.ac.uk/modules/bmg900m1/OShaughnessy.pdf)
date of access 23.12.2009.+/ (Vivek Suneja, 2002 p. 139/ by M. Porter
1990) Policy module.
− Porter, M. E., 1980, Competitive Strategy: Techniques for Analyzing
Industries and Competitors, New York: Free Press.
− (Tsurumi, Y., Multinational Management, Ballinger, Cambridge, MA, 1984,
p. 85)
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