The Diamond Model by Michael Porter

Deep in the Alps lies a small town called Clay. The sun was rising over a frosty blue mountain, and drops of dew dripped down from the leaves in the valley. Arthur awoke to find his bedroom filled with light. He went downstairs and drank a glass of water, not hungry enough for food. Arthur went outside into the chilly morning and started walking down the road. The road was lined with hundreds of huge alpine trees. A large flock of birds flew over Arthur’s head in the sky.

1. High pressure for local adaptation combined with low pressure for lower costs would suggest what type of international strategy: A. global B. multidomestic C. transnational D. overall cost leadership 2. Foreign direct investment includes the following form of entry strategy: A. licensing B. franchising C. joint ventures D. exporting 3. According to Michael Porter, firms that have experienced intense domestic competition are A. unlikely to have the time or resources to compete abroad. B. most likely to design strategies aimed primarily at the domestic market. C. more likely to design strategies and structures that allow them to successfully compete abroad. D. more likely to demand protection from their governments.

In addition, the internationalisation is the strategy to occupy the foreign market step by step. Also, the porter’s competitive advantages theory is to analysis the strategies of global business. They could divide to three strategies: over cost leading, diversity, and market focus strategy (Passemard& Calantone, 2000). The cost leading strategy focus on establish efficient scale production facility and minimize the research and advertising cost. The diversity strategy focus on introduce some unique product in whole industry. But, this strategy will with a high cost price. The focus strategy is attack of a particular customer group or specialist regional market, its purpose to design the service for a particular target. Consequently, the companies need to consider the internal and external factor condition, such as: factor condition, demand condition, related and supporting industries condition, and firm strategy and rivalry. They are called diamond system. This dynamic system gives the company a standard to measure theirs advantage and disadvantage before they enter foreign market. Moreover, the specific advantage in Internationalisation of Production is give companies a new choose for exhausted market (Strange,S. 1992). In an international environment, the companies will face more uncertain and unequal condition than home market, therefore the companies need keep the attention of more factors:

The foreign market must offer a location advantage that makes it profitable to produce the product in the foreign country rather than simply produce it at home and export it to the foreign market. It includes resource endowments, economic and social factors, such as market size and structure, prospects for market growth and the degree of development, labour and input materials costs, the cultural, legal, political and institutional environment, government legislation and policies

“Porter’s five forces”: Introduction. “Porter’s five forces” is widely applied in today’s business world. Harvard Professor Michael E. Porter’s first HBR article “How competitive forces shape strategy” was published in 1979. It became revolutionary in the field of strategy. Porter’s subsequent work has brought big changes to the study of competitive strategy for corporations, regions, and nations. With assistance from his colleagues from Harvard Business School, Porter continues to update and extend his classic work, providing practical guidance for

An external analysis looks at the general macro environment and industry attractiveness. A PESTEL analysis will be used to look at the macro environment and Porter’s Five Forces framework will follow to provide a clearer picture of industry attractiveness.

In the article “The Competitive Advantage of Nations” Michael Porter describes a diamond shaped relationship of forces that define a country’s potential for being competitive in a specified industry. The four points on the diamond representing the different forces are: factor conditions; demand conditions; firm strategy, structure and rivalry; and related and supporting industries. According to Porter, the four points apply pressure to each other resulting in a national

Social classes exists since the years. Some people born rich and their generation stays rich all the time, while other born poor and all their stays poor all the times. However, there are other people who move from one class to another. Sometimes this mutation depends on the individual effort. In the Diamond Necklace, Guy de Maupassant describe the life of Mathilde who born poor and was not happy with her situation. Since she was unable to switch her social class, she tried for all occasion to appear as rich women. In this short story, Maupassant shows in different ways why Mathilde should recognize and accept her social class and live in the level of her class. Maupassant thinks Mathilde should accept her social class because her honor does not depend to her social class. Also, she should accept her class because happiness does not depend on the materials things. Finally Mathilde should accept her social class to avoid the deterioration of her life.

10 2.2.1. The Doubled Diamond vs. a Single National Diamond ................................. 11 2.2.2. The Role of the Multinational Enterprises (MNE’s) as Empowering Developing Countries rather than Constraining their Growth.................................. 12 3. Research Setting: Why Use Mexico to Study Porter’s Diamond? ............................... 17 4. Research Questions....................................................................................................... 19 5. Methodology ................................................................................................................. 20 5.1. Positioning the International Competitiveness of the Industry.............................. 22 5.2. Addressing the Research Questions....................................................................... 23 6. Results........................................................................................................................... 28 6.1. The Competitiveness of the Automobile Industry in Mexico................................ 28 6.2. Positioning the Industry as Internationally Competitive ....................................... 29 6.3. Using Porter’s Diamond to Assess Sources of Competitive Advantage in the Automobile Industry in Mexico: 1993-2003. ............................................................... 39 6.3.1. Factor

It is undeniable that strategies of today’s organization lead to manage for Globalization because the world is becoming global market. Concerning the relevance for Today’s Business, it is questionable: Are Porter’s Five Competitive forces still applicable? Dälken (2014) argued that the question to what extent digitalization, globalization and deregulation affect Porter’s Five Competitive Forces can be answered as follows: Since Porter’s Five Forces relies on the principals of microeconomics; the challenge of the credibility of the model is limited. The mentioned three forces make network unstable, more extensive, and more dynamic.

According to Michael Porter, “Every industry has an underlying structure, or a set of fundamental economic and technical characteristics, that give rise to these competitive forces” (Porter 1998:23). The forces mentioned above are: industry rivalry, threat of new entrants, threat of substitute products, bargaining power of suppliers and bargaining power of buyers. Additionally, Porter mentioned that: “Knowledge of these underlying sources of competitive pressure provides the groundwork for a strategic agenda or action” (Porter 1998:22).

The latter includes (4) bargaining power of suppliers; and (5) bargaining power of buyers. ‘The strength of each of these competitive forces is determined by a number of key structural variables’ (Grant, 1998 in Mazucatto, 2002). The importance of this framework is emphasised by Porter who argues that ‘Understanding the forces that shape industry competition is the starting point for developing strategy. Every company should already know what the average profitability of its industry is and how that has been changing over time” (Porter, 2012, p.235). In the context of the building materials industry, the application of Five Force analysis indicates that the industry has growth rates that are mostly lower than the GDP growth across regional economies. It is cyclical in nature and fragmented in structure with a large number of small and mid-sized firms that create micro-markets and heterogeneous customer needs in different geographies. This becomes a big deterrent for any member firm that intends to exploit and enjoy economies of scale beyond a limit. What’s more, commoditization and lack of differentiation erode any scope for healthy margins. High weight to value ratio of ‘heavyside’ building products renders global sourcing ineffective. Entry barriers are virtually non-existent owing to the standardised, low technology nature of products that are devoid of patents and produced with non-proprietary technologies, and this particular industry attribute strips

The same critics that Zahra has addressed to Oviatt and McDougall’s analysis applies on his list of factors contributing to the INV’s competitive advantage. We should acknowledge that every country has some economic or cultural specificity; therefore there are some universal business rules which apply on the entire global market. The traditional firms, who possesses years of local market experience, ownership and abundance of their resources are more qualified to compete on the international level.

As trade increases hyper-competition grows forcing organizations to go global. By a company going global it requires them to rethink strategy and reform (Ananthram and Pearson, 2008). Global organizational structure is the way a company aims to merge local preferences with global strategy. The definition of global strategy is “strategic choices that have the characteristics of being globally uniform or integrated,” (Yip et al., 1997) such as standardization of products, uniform marketing, and competitive moves, but all globally (Townsend et al., 2004; Zou and Cavusgil, 2002; Bayraktar and Ndubisi, 2014). Global strategic strategy is a way to adjust to globalization. Globalization is “the economic and social process by which economies and communities grow inextricably interdependent “(Jhirad et al., 2009). The recent financial crisis (Das, 2010), large amount of poverty, and climate change are all problems that show how the world is globally connected because all countries impact each other (Jhirad et al., 2009).

Any country should use porter diamond theory of national advantage. It's designed to help understand the competitive advantage nations. It suggests that the national home base of any organizations are playing a supportive role in shaping the size or scoop to which it is likely to achieve advantage on a global scale. This home base provides basic factors, which support organizations from building advantages in international competition. Porter classifies four determinants: Factor Condition, Diamond Condition, Relatives & supporting and Structure, strategy & Rivalry. Egypt government acts to catalysts to improve Egypt position in a globally competitive economic environment. They found that they can create new factors such as skilled labor and high technology (Porter M., 1990). Porter's diamond model suggests threat there are inherent reasons why some nations are more competitive than others on an international market. Another factor that influence in competitive advantages such as the policies that put by government. One of the most influencer policies is (FDI) Foreign direct investment