Porters Assignment

8/8/2019 Porters Assignment

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DIAMOND

MODELBy:- PROF. MISHAEL E.PORTER


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CONTENTSDESCRIPTION OF PORTERS MODEL

PORTERS BELIEVESCHATACTERISTICS OF PORTERS MODEL

OBJECTIVES OF PORTERS MODEL

POSSIBLE BARRIERS TO ENTRY BY PORTER

STRATEGY OPTIONS ACCORDING TO PORTER

PORTER DIAMOND MODEL

FOUR POINTS OF PORTER DIAMOND MODEL

THE MODEL AS A SYSTEM

ROLE OF THE GOVERNMENT

APPLICATION OF THE DIAMOND MODEL


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DESCRIPTIONIts a framework which is presented by Prof.M.E.Porter in a diamondform which enhances our understanding of the international

competitiveness of firms.

He stated that like companies compete in international markets for their fare share of the world markets.

Porter states productivity is the main factor for internationalcompetitiveness, even standard of living of a countrys population canbe improved as a direct result of increases in productivity.

Porters diamond model emphasizes that a firm should onlyinternationalize when it has a strong position in its home market.


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First a firm should make a strong hold in the domestic marketthen it should explore the opportunities available at theinternational level.

In Porters diamond model the role of the government is of achallenging nature as it is to encourage or even pushcompanies to raise their aspirations and move to higher levelsof competitive performance.

Porters factors are different from that of the traditional factors(Land, Location, Natural resources (minerals, energy), Labor and Local population size).


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Porters model looks at what ma kes nati ons comp e titive .

It cons is ts of four points which high light s va r ious f act ors in it, in which th e effe ct of one point d e pe nd s on th e other point.


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CHARACTERISTICS OF PORTERS MODEL

It focuses on th e production and c onsu mpti on of goo ds and ser vices in a g eo gr aphica l re gion.

It s hows how, wh e n th e comp one nts work

toge ther the e conomy wi ll be s trong.

Thing s su ch a s GDP a re the resul t of the model work ing or not work ing.

Used t o und ers tand and e va luat e the s tructure of an ind us tr ys bus iness e nvironm e nt and th e thre at s of comp e tition t o a s pe cif ic c ompany.


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OBJECTIVES OF PORTERS MODEL

Creat e effe ctive links with c us tomers and su pp liers

Creat e ba rr iers to ne w e ntr ant s and su bs titute products


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POSSIBLE BARRIERS TO ENTRY

Ec onomies of s ca le .St rong, es tab lis he d c os t advantag es .St rong, es tab lis he d b r and s .P ropr ie ta r y p roduct di ffere nc es .

Major s witching c os ts .Limite d or res tr ain e d acc ess to dis tr ibution.Lar ge capita l ex pe ndit ure requ ire me nts .Gover nm e nt p olicy.Def inite s trong c omp e titor re ta liation.


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STRATEGY OPTIONS

Acc or ding t o P or ter the s tr at e gy options can b e divide d int o two pa r ts :

P r ima r y St r at e gies

1. Differe ntiati on2. L e a s t Cos t

S upp or ting St r at e gies

1. Inn ovati on2. G rowth3. A llianc e


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PORTER DIAMOND MODEL

Firm Strategy, Structureand Rivalry

Related andSupportingIndustries

FactorConditions

DemandConditions


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THE FOUR POINTS OF PORTER MODEL

Factor Conditions(Inp uts and R esour ces rele vant t o the P roduction of Goo ds & Ser vices)

N at ur a l Resour cesHuman R esour cesK nowledg e and in for mati on R esour cesC apita l Resour cesPhy s ica l Infr a s tructure

Sci e ntif ic and t e chn olo gica l infr a s tructure Admini s tr ativ e infr a s tructure


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Demand Conditions(Refers to domes tic (inter na l to re gion) de mand for goo ds &

ser vices produce d in re gion)

De mand c onditi ons inc lude- Siz e of ma rke t- S ophi s ticati on of consu mers- Th e nat ure of home de mand for products and ser vices


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Firm Strategy, Structure and Rivalry(the contex t s haping th e types of s tr at e gies e mp loye d and

the nat ure of loca l r iva lr y )

Inter na l Envi ronm e ntManag er ial s ys te ms , p r actic es & app roach es

Co mpany g oa ls and c ulture

St ructure of or ganizati ons (own ers hip )

Nu mb er and typ e of comp e titorsCre at es pressure to imp rove and inn ovat eP ressures f ir ms to sell ab road in or der to grow


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Related and Supporting Industries(the avai labi lity and qu a lity of loca l su pp liers and rel at e d

ind us tr ies)

Fir ms that p roduce goo ds and ser vices nee dthe su pp or t of other or ganizati ons , f ir ms and

ind us tr ies

Exis te nc e of domes tic su pp lier (s)Clus ters of like f ir ms


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THE MODEL AS A SYSTEM

The effe ct of one point d e pe nd s on th e other .For ex amp le f act or dis advantag es will notlead f ir ms to inn ovat e unless there is suff icie ntr iva lr y.

Its a lso a self -re infor cing s ys te m.For ex amp le a high level of r iva lr y of te n lead s to the for mati on of unique s pe cia lize d f act ors .


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ROLE OF THE GOVERNMENT

The gover nm e nt p lay s a v er y c rucia l role in thi s model .

It e nc our ag es the compani es to r ai se the ir perfor manc e .For ex amp le by e nfor cing s tr ict p roduct s tanda r ds .

Focus on s pe cia lize d f act or cre ati on.

Stim ulat e loca l r iva lr y by limiting c o-oper ati on and antit rus tre gulati ons .

Stim ulat e e a rly d e mand for advanc e d p roducts .


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APPLICATION OF THE DIAMOND MODELThe Japan ese FA CSIMILE ind us tr y is the bes t ex amp le for the imp leme ntati on of the diam ond m odel of nati ona l advantag e .

The Japan ese f ir ms achi e ve d a d ominating p os ition for the followingre a so ns :-

Japan ese Fact or Co nditi ons th e y hav e a rel ativ ely high n umb er of ele ct r ica l e ngin eers per capita.

Japan ese de mand c onditi ons - the Japan ese ma rke t wa s ver yde manding b e ca use of the wr itte n lang uag e .

La r ge no. of rel at e d and su pp or ting ind us tr ies with advanc e dte chn olo gy g oo d miniat ur ize d c omp one nts s inc e there is less s pac e in Japan.

Domes tic r iva lr y in th e Japan ese Fa x machin e ind us tr y p us he dand ma ximize d inn ovati on and resul te d in r apid c os t re duction.

The Japan ese Fa x machin e (f ac s imile) ind us tr y is the perfe ct ex amp le of a c ou ntr y following and imp leme nting th e four points of the P or ters diam ond m odel su cc essfull y.


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Porters Assignment