What is Porter's Diamond Model
Porter's Diamond - Competitive Advantages of Countries
You have probably already noticed that certain industries are particularly common in some countries. The watch industry in Switzerland, mechanical engineering in Germany or the shoe industry in Italy. But why is this so?
The economist Michael Porter has tried this competitiveness of individual states in relation to these industries with the Diamond model to explain.
The diamond consists of individual elements that influence each other. They can inhibit or encourage each other and are determined by the company as well as by the environment around them.
Elements of the diamond model
Graphic representation of the Porter Diamond model
The factor conditions concern the existence and availability of production factors.
- Raw materials and energy
National demand determines how much a company develops. If domestic demand is high and demanding, the company will respond to it.
3. Corporate strategy, structure and competition
Competing companies encourage competition and bring the entire industry forward.
4. Related and supporting industries
The closer there are similar companies, the more they can cooperate, which benefits the entire industry. This argument can be used to explain the formation of cluster regions that took place in Germany and Austria in the 1990s.
There are two other elements that are added to the diamond model: the state and chance.
This includes all factors that cannot be influenced.
State: promoting innovation and competition, protecting industries, stimulating demand
This is about the state's active promotion of innovations, investment incentives and purchase support programs, but also about slowing down competition.
Sources on Porter's Diamond Model
Porter published this in his book Competitive Advantage of Nations.
HBR - Competitive Advantage of Nations
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