Monday, August 13, 2007

Porter's Diamond

A diagram showing four conditions:

-->Demand conditions

-->Factor Endowments

-->Related and Supported industries

-->Firm strategy, structure, and rivalry

that usually must be all favorable for an industry in a country to develop and sustain global competitive advantage.

1. Demand Conditions: Market demand of a product in local market and foreign market.If the demand is more in the local market the company must focus on that product to develop a sustainable competitive advantage
2. Factor Conditions: A company has both natural and acquired resources.It can create its own factors like skilled labor,strong technological base,etc in order to develop its core competencies
3. Related and Supported Industries : If the local related industris are competitive it will force the company to innovate and be competitive and rapidly respond to changes in the external environment.
4. Firm's Strategy,Structure and Rivalry :
The culture of a country have an effect on the firm's strategy and structure.For instance certain countries have more family owned businesses than others which are more hierarchial.
Rivalry might help a company from being competitive.It helps a company to continuously compete with the others and continuously improve their value chain and thrive for innovation in products and processes.

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