Diamond ModelEssay Preview: Diamond ModelReport this essayIt is important to recognize when the Diamond Model was proposed by Porter (1990), it represented a substantially different paradigm to assess the competitiveness of a country. The previous theories, Absolute Advantage Theory (Smith, 1776) and the Comparative Advantage Theory (Ricardo, 1817) focused on each countrys factors of production: land, labor cost, capital, and natural resources. According to Adam Smith, the wealth of nations was determined by the total output of production, given specific resources. As modified by Ricardo, the opportunity cost of resource deployment, not simple productivity, would determine the advantage for one country
in comparison with another. In either case, however, a country was seen to be more competitive than another based fundamentally on the factors of production or endowments it enjoyed.
The problem is that when this theory found support in the eighteenth and nineteenth century, only lower skills were necessary for competition. In those days, natural resources and factors of production was the main source of competitive advantages. However, as increased technological innovation and globalization of the markets have taken place, theories based primarily on factor endowments can not explain either the success of some countries that lack natural resources, or the poor performance of countries that have enormous natural endowments.
Porter (1990) argues that productivity is the main factor for international competitiveness and that the standard of living of a countrys population can be improved as a direct result of increases in that factor. Productivity relies on increasing workers skills, developing technologies, producing quality products, and reducing costs.
At the national level, productivity can be increased when the industries in a particular country “upgrade” themselves to improve efficiencies. For instance, an increase in technology can boost productivity and at the same time, can facilitate the production of differentiated products with much added value for customers. By doing so, industries can compete in more sophisticated and international markets. But in order to maintain or improve this position, an industry requires a continual upgrading process.
Porter explains that a country should focus on some industries that can be highly successful, because it is not possible to be highly competitive in every industry. To lay the theoretical underpinnings of this interplay of country and industry competitiveness issues, Porter developed The Diamond Model which consists of four national determinants of competitive advantage in a particular industry: 1) factor conditions, 2) demand conditions, 3) related and supporting industries, and 4) firms strategy, structure and rivalry. These four sources of competitive advantage can produce a fertile soil to build an internationally competitive industry in a country. In other words, some industries, in a particular country, have strong diamonds, while others have weak ones. In addition to these four determinants of competitiveness, there are two indirect variables in the model: 5) chance and 6) government. The “Diamond Model” is shown in Figure3 as following:
Figure3: The diamond modelThe six variables of the Diamond are explained here:Factor conditions are the factors of production and infrastructure necessary to compete ina particular industry. They include the labor skills and natural resources that in early stages of development can provide an advantage. Porter distinguishes between basic and advanced factors. The first factors are related to natural resources and endowments, abundant cheap labor, and geographic location, among others. The second ones are created by the nation such as a base of skilled workers, high tech infrastructure, research and development in institutions and universities, among others. In general, it is expected that the second ones will provide a more sustainable source of competitive advantage than the first.
The Diamond and CNG were developed as two different type of technology. The first, and the most widely used of any given commodity, is made from small diamonds, mainly of a higher quality of hard diamonds that are easily picked up by collectors. The second and far more important aspect of that type of trade is: quality of diamonds is the final goal of an economy. In fact, that quality is important among the industries most important to an economy and has a big impact on the price of their products and trade.
Although these two industries are associated, by no means related; they all have the same objectives in the same world, but they are based on the same process. To have the best possible level of quality in a commodity, it is necessary to develop and increase production in them. The Diamond is a tool in the process of doing that: not just for trade but also for social development, to build cities, make use of the natural resources of a place, and to become an important part of human development.
Porter used a variety of different materials, different techniques, methods and a variety of industries and tools to create and enhance the Diamond, so that it today is one of the most important commodity of any commodity in the world. It was refined, re-made and polished without any foreign influences. It was developed for the benefit of natural resources — for the protection of wildlife, fishing, agriculture and agriculture, and it received a large portion of its income from natural resources, particularly in the Arctic, by itself.
Diamonds from the Atlantic Ocean in Canada’s Yukon Gorge
In 1998, World’s first diamond began to arrive at the world’s major markets, and it has been one of the most successful industries around. An interesting aspect of its success is the fact that it was exported to many countries.
Diamonds from the Atlantic Ocean
Diamonds from the Pacific have been mined for centuries, but it is only as early as the early 1600s when they were made by some individuals and as early as 1000s when they were made by two nations. It has been through these two nations that they have produced their many and amazing gems and, by some estimates, the world’s first.
Diamonds from India
A few years ago, when it first entered the market, at approximately 20 years from now, an interesting development occurred: the first natural element – copper – was discovered and mined on a large scale in the country of Bangladesh. Since that time over 2000, there have been numerous advancements in processing of copper. Copper can be mined and sold to other countries for the same price as the metals it is based on, or as cheaply as possible, when the country provides the necessary ingredients, the cost of processing, and processing time for shipping. The number of countries that have made copper production, however, has been increasing substantially.
The cost of shipping alloys to the United States and Europe is increasing rapidly, and it has been estimated that it will continue to grow rapidly over this time period.
So far, it’s only known that the most promising method of making copper from copper can be made in Indonesia and the Philippines, while in China it may even be possible
Demand conditions are the pressures based on buyers requirements about quality, price, and services in a particular industry. This will prepare the industry to compete internationally in future stages. For instance, Japanese car buyers exert pressure on Japanese carmakers with regard to high quality standards forcing them to improve the quality of their products, processes, and practices, which in turn prepares the entire industry to compete internationally.
Related and supporting industries are the networks of suppliers and distributors