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Porter’s Diamond Theory

Introduction
• The competitiveness of a nation/ organization depends on its
innovation ability.
• Pressure and challenges in business are the main causes of company’s
engagement on innovation and upgrade.
• Competitiveness in a country has different patterns (Porter, 1990).

Success of Companies in International
Markets
• The best companies in the international market differ in different
perspectives and aspects.
• Successful companies employ their own special strategies.

The Diamond of National Advantage
• This theory underlines the capability of different companies.
• The reason why companies involve themselves in ruthless
improvements and innovation.
• The ability of nations to overcome barriers to innovation and
organizational change.

Porter’s Diamond Theory
• The Porter Diamond theory of National Advantage was designed by
Michael Porter.
• It helps in understanding the competitive advantages owned/
possessed by nation.
• The theory helps in explaining how the government acts as a catalyst
in National development.
• It also explains improvement of a country’s competitive advantage in
the world competitive environment.

Content
• The features of a nation are vital for its success in the international
market.
• The theory depicts the shape of a Diamond framework.
• The theory describes the factors that lead to success of a country’s
organization in the world market.

Determinants of the National Advantage
(Nitisha)
• They are;
1. The Factors of production
2. The demand conditions
3. The related and the supporting industries
4. The Firm, Strategy, Structure and Rivalry.

Factors of Production
• Involve the raw materials and inputs for production.
• Inputs are divided into;
a) Specialized factors
b) Advanced factors
c) Basic factors
• Endorsement with all these factors enables a country succeed in
global market.

Demand Conditions
• Demand is all about customer’s nature and size.
• Increased demand for a company’s products increased its likelihood
to succeed in global market.
• Strong demand increases the chances of improved quality in the
products produced.

Related and Supporting Industries
• These are the company’s in a county which lead in production of
certain products.
• The industries determine the fate of the other companies.
• Growth of one company leads to growth of another related one.

Organizational Strategy, Structure and Rivalry
• These vary in different countries.
• Strategy helps in goal setting.
• Structure aid in operational management.
• Rivalry aids in creativity and innovation of ideas.

Other factors
• They include; the government role and chance (Mahmud).
• The government acts as a catalyst in national success and also a
challenger.
• Chance simply defines an opportunity for maximization.

Criticism/limitation of the theory
• Ignorance of the role of a country/ state.
• Ignorance of the history influence.

The four determinants- conclusion
• They can also be called d...