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Porters Diamond Model - Assignment Example

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The assignment presents Michael Porter’s theory of competitive advantage explains how countries become the best in producing various products. The theory of competitive advantage underlines four factors that are known as the diamond; these factors include national demand…
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Download file to see previous pages Theorists such as Krugman, Chandler, and Rugman have developed theories that eliminate the weaknesses of the diamond model. According to Porter, he argues that the success of a nation is dependent on the prosperity of its firms. The nation acts as home base essential for an organization’s economic growth and provides competitive advantages. Porter uses the Diamond concept in determining the economic growth rate of a nation. The Diamond concept offers a concept of understanding firms and their management of resources. It also gives the competitive advantages of different businesses in a nation. The first attribute is the factor condition, which is crucial to organizations growth. This attribute helps in improving the cluster structure. The cluster structure involves the relationship between the customer, skill, technology, and distribution of products. These clusters are vital in attaining economic success at a national level. The Italian tile industry gained a competitive advantage because of the cluster structure of the business. Organizations in the industry relate well with customers and they have workers who have essential skills in producing the product. The industry has also succeeded because of the use of the kiln technology, which helps in minimizing the cost of energy used to produce tiles. The industry developed this technology after the oil crisis of the 1980s, which motivated companies to develop new ways of remaining competitive.
The second attribute is demand conditions, which concerns with home market nature such as home demand influence. The home demand can be affected by customer’s wants and needs (e.g local demand of product). The domestic demand plays a significant role in shaping an organization’s innovativeness and ability to upgrade, which are vital in determining the breakthrough of the organization in the national market. – example? The wine-producing industry in France has developed because of the high demand for the product by local citizens.  ...Download file to see next pagesRead More
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