Porter's Diamond Model

Porter's Diamond

Introduction

The diamond model of Michael E. Porter is focused in its original form on competitive advantages of nations, but can be extended to companies. The following are the essential elements of the competitiveness of the German automotive industry in China are summarized based on the diamond model (Smit, 2010).

These four factors are:

•Factor binding

•Demand bonds

•Related and supporting industries

•Corporate strategy, structure and competition

Factor conditions

The automotive industry is largely determined by the advanced and specialized factors, since they increase the productivity sustainably. The automotive industry in China has grown rapidly over the last few years; nearly 9 million cars a year are produced. With this increase, so does the number of qualified workers. However, there is still a big gap between talent supply and demand in the automotive industry. In Western Europe or the United States have about 30% of the employees of the automotive industry enjoyed a higher education in China less than 6% (Sardy & Fetscherin, 2009).

The evolution of Chinese automobile industry calls for more professional staff in areas such as research and development, engineering, marketing, purchasing, finance and interdisciplinary expertise. The professional education at the university has been using existing technology cornerstone for good staff, but often lack the practical experience yet. This lack of skilled labor means that companies have great difficulty finding suitable staff.

China has the money, the lack of the commodity groups at the moment and invested more heavily in recent months in the commodity sector.

Demand conditions

The pace of growth in the Chinese auto market has fallen under the global crisis may, however, prevented the government stimulus packages to date, such as a slump in the U.S. In growing Asian countries like China suppliers with classical systems, such as safety or comfort features found in older markets have long been standard, achieve attractive growth rates and points. Chinese people often live very frugal and saving targets set for greater consumer spending as a property or a car. In principle, the growing middle class provides a much higher potential than the target mainly the upper layers. With a premium product, a maximum of five to ten percent of the Chinese population are addressed, 90% of all consumer goods are bought by the middle class (Sardy & Fetscherin, 2009).

Related and supporting industries

Many suppliers are attracted to China to expand their customer base can be there. However, suppliers need to adapt to Western manufacturers in China. ...