MANAGING BUSINESS ENVIRONMENT

Analysis: Michael Porter's Diamond Framework: The Competitive Advantage of Nations

Table of Contents

Introduction1

Michael Porter Diamond1

Factor Conditions2

Demand Conditions3

Related and Supporting industries4

Firm strategy Structure and Rivalry4

Government4

Chance5

Application of Porter's Diamond Model5

Criticism on Diamond Model5

China6

Business overview9

Background9

Our Business10

Advantages11

Disadvantages12

Conclusive Remarks12

Analysis: Michael Porter's Diamond Framework: The Competitive Advantage of Nations

Introduction

In this report, I have tried to link the porter's Diamond/cluster Model with the prevailing situation in China textile industry. I have performed this analysis with a hope that it will provide us information necessary to operate in that country. Porter's theory provided us with past information regarding, how the clusters developed, and from what sources china Textile industry is extracting its advantage from.

In the light of Porter's Model, we have also considered the positive aspects of the future, and as well as negative aspects, which might reduce the competitive advantage of China.

Michael Porter Diamond

According to Classic theories of international trade, the comparative advantage that a country has over others comes from its inherited resources. Resources like Land, Labour, minerals and other natural resources.

However, Michael porter, the renowned professor in Harvard University presented a model. The Model says that, nations can build their individual competencies in regards like investing in its skilled labour; this will bring advantages to both, industry and the country. Further, that knowledge base businesses have, government support for projects in a particular direction is likely to create a positive impact on the industry as whole. This model is known as Diamond Model; it is an economic model and was first published in the book “The Competitive Advantage of Nations”. From this book, it has gain popularity and now matter of study around the globe.

The name generates the curiosity as what led to this name of diamond. The story is that Porter formed a diamond shaped figure, highlighting the six broad factors that shape the competitive advantage that a country enjoys over the others (What is Michael Porter's Diamond Model, 2012). The idea is that, clusters of industries get formed in nations. In these clusters, the performances of companies are interrelated to each other. The competency of one firm is associated with the economic performance of the other firms (Porter, M.E. 1990, n.d.).

There two steps involved in porter analysis are:

1. Identification of ten trading nations where clusters had been formed.

2. The competition history dynamics are studied to understand how the competitive advantage was created.

The phenomenon analysed as a result of the above steps can be classified into six broad factors. These factors are now considered the key tools for assessing the competitiveness of nations. It includes

1. Factor Conditions

2. Demand Conditions

3. Related and Supporting Industries

4. Firm Strategy, Structure and Rivalry

5. Government

6. Chance

Factor Conditions

It includes human, physical resources, knowledge, capital resources and infrastructure. Companies can exploit these factors. These are the factors which country can capitalize on. Technology and Human skills are typical examples of these types. Linguistic abilities of work are also considered a ...