Diamond Model Analyze - Essay Example

Diamond Model Analyze Introduction The diamond model as an economic model by Porter Michael in the book competitive advantage of nations explains why certain industries are more competitive in certain locations. It thus explains the competitiveness of a company in the international market. The model uses: firm strategy, structure and rivalry; demand conditions; factor conditions as well as related and supporting industries to explain the conditions that can be favorable for direct foreign investment. This essay therefore seeks to explain the environment factors that a company can consider when attracting direct foreign investment. Porter’s diamond Model is as shown below The environment factors that a company should take in to account when trying to attract foreign investment therefore includes the following: first, factor conditions. This includes the production factors of the given country from which the company is located. They are among others, human resource; capital resource; infrastructure; knowledge and natural resource. These are very important. A country endowed with natural resources that are important for the production especially in the line that the foreign investor has interest will be an advantageous situation. Further, infrastructure makes it easy for operations reducing cost of doing business. For example an existence of an airport makes it easy for transportation of goods or perishable products and as such is a good environment for wooing direct foreign investment. Secondly, the demand conditions also come to play. As a factor that would influence the ability for doing business for foreign investors. Demand for the products that are generated by the foreign investor is an environmental factor of consideration. Without demand the investor will not be attracted and as such no foreign investment can be realized. Related supporting industries in the line that the foreign investor is also necessary and is a factor to consider. This is because they make easier the operation of the given foreign company and as such their existence around can provide a good environment for the survival and operation of the foreign investment. For example if the direct foreign investment was targeting production of cotton, an existence of textile industry or other related ones will make the investment viable and as such encourage direct foreign investments. Competitive opponent’s existence is another environment factor that should be taken in to account when trying to woo a foreign direct investor. This is because, the competitive opponents affect the market share that a company has and as such foreign direct investor will way the probability of having a business that flourishes and is not faced out with stiff competition. The government of the country that the direct foreign investment is targeted is yet another factor to consider. This is because different governments have different policies that affect business in the host country. Therefore when intending to attract direct foreign investment an analysis of the government policies which may include taxation policy, trade barriers among others. Conclusion This essay has therefore identified related industries; governments; demand availability; competitive opponents; and infrastructure as the environment considerations that a company should take in to consideration when trying to attract direct foreign investment. This issues when analyzed can give an indication of the environment for which the foreign direct investment is being attracted to as well as the viability of having them brought on board. Read More