Implications of Porter’s Diamond Model for Companies’ Competitiveness

This research paper examines the implications of Porter’s Diamond Model for companies’ competitiveness. It discusses the factors that affect competitiveness, such as bargaining power, rivalry, and government policies. It also explores the different strategies used by companies, including cost leadership, differentiation, and focus strategy. Find expert study material and solved assignments at Desklib.

Implications of Porter’s diamond model for companies’ competitiveness 1
IMPLICATIONS OF PORTER’S DIAMOND MODEL FOR COMPANIES’
COMPETITIVENESS
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Implications of Porter’s diamond model for companies’ competitiveness 2
Table of Contents
Abstract............................................................................................................................................1
Introduction......................................................................................................................................1
Porter’s Diamond Model.................................................................................................................2
Competitive advantage for companies.............................................................................................3
Factors that affect the competitiveness of companies.....................................................................3
Forms of generic competitiveness strategy used by companies......................................................4
Cost leadership strategy...............................................................................................................5
Differential strategy.....................................................................................................................5
Focus strategy..............................................................................................................................5
Conclusion...................................................................................................................................5
List of References............................................................................................................................6

Implications of Porter’s diamond model for companies’ competitiveness 3
Abstract
In companies’ settings, competitiveness is the attribute that enables them to outperform
their competitors. The main focus of this research paperwork is to examine the meaning of
competitiveness among companies at a different level of countries within the context of Porter’s
Diamond Model. At the level of a nation, there are 2 distinct schools of contemplation on the
competitiveness of country, the financial school that discards the notion of Porter’s Diamond
model of national competitiveness. The other school is for management that support notion of
competitiveness at national point. Therefore, this research paper reviews different ideas about
these two notions with particular reference to trade hypothesis as well as the theory of
competitive merit of nations that had been originally advanced by the Porter Diamond model.
Although the model of Porter’s Diamond on the competitiveness of companies has been
extensively examined in the management literature, its real contribution to the body of
knowledge and understanding has never been clarified. The major objective of this research is to
examine the competitiveness of companies in different countries.
Introduction
From the time of its publication in the early days of 1990, Model of Porter’s Diamond
has attracted huge consideration. Besides, Porter’s model was created by Michael Porter who is a
known authority in the field of corporate strategy together with financial competition. The
representation is based on nation particular “determinants” together with two exterior variables
that are diverse. Four determinants of Porter together with two outer forces intermingle in the
“diamond” of spirited merit, with the quality of the nation’s global competitiveness depending on
the category as well as the quality of these interactions (Widiantoro, Pascal, Nguyen, and Sharief

Implications of Porter’s diamond model for companies’ competitiveness 4
2017). Therefore, Porter Diamond is also referred to as the Porter Diamond Hypothesis of
National Advantage. The model is essentially designed to aid in understanding the competitive
merit groups or nations possess due to specific factors available to their operations. Besides, this
model helps in offering an appropriate explanation of how authorities of different nations or
organizations can act as catalysts to enhance the position of a country or the company in the
international competitive financial setting (Liu and Lin 2017). Besides, Porter’s Diamond is a
proactive financial hypothesis rather than one that simply quantifies comparative advantages that
the company posses in its operations. Therefore, the primary target of this research paper is to
examine the implications of model of Porter’s diamond for the competitiveness of organizations
around global society.
Porter’s Diamond Model
The theory as proposed that comparative merit of different companies around the
international society resides in the factor endowments that the nation might be fortunate enough
to inherit. Some of the factors endowments according to this model among companies comprise
of land, labor, and natural resources, together with the size of the local population (Fainshmidt
Smith, A. and Judge 2016). Besides, the founder of this model had argued that a nation is a
useful factor in the competitiveness of the company. For instance, the founder reported that the
nation could develop advanced factor endowments such as skilled labor, the firm technology,
along with knowledge base, support of the government, and culture which are factors essential in
improving the competitiveness of the company. Porter used the diagram in the shape of Diamond
to illustrate the determinants of national advantage towards the operations of companies

Implications of Porter’s diamond model for companies’ competitiveness 5
(Brosnan, Doyle, and O’Connor 2016). The diamond framework represents the national playing
field that nations established for different companies to operate effectively within their limits.
The strategic analysis of this model concentrate on two different vies of companies.
These views according to this model include industry-view together with a resource-based view
all which is essential in improving the competitiveness of the companies (Bakhshinejad 2014).
Besides, these views of the model analyze the organization without taking into consideration the
relationship between the strategic choices of companies such as Porter generic strategies together
with its institutional structures. Therefore, this model remained to be the device for analyzing the
task environment of companies. Porter’s Diamond model is useful in illustrating competitiveness
of companies as it shows that strategic selections should not be the purpose of the framework of
the company and the assets of the firm, but it needs to be a role of the limits of the institutional
structure (Mboya and Kazungu 2015). Therefore, though use of this model, institutional analysis
of most companies such as National Diamond becomes increasingly essential as companies enter
new operating settings and establish their operations within the new institutional framework.
The model reports that few businesses in the current world remain ‘local’ in nature of
their operations. However, some businesses are truly local in the manager they are managed or
operated. Such companies that are considered to be local in nature of their operations comprise
of the restaurant (Wonglimpiyarat 2018). Conversely, most businesses have at least some section
of their operation that is impacted by international market settings. It is most likely that the
competitiveness of different companies is affected by global forces. Therefore, there is a need for
every management of companies to understand exactly what those forces are and the manner
they impact what management and workers of the companies are going to be capable of doing

Implications of Porter’s diamond model for companies’ competitiveness 6
going forward with their operations. Once, when companies are looking at Porter’s Diamond
Hypothesis, they will be thinking of ideas about how their operations impact what they can do
from the perspective of business operations. For instance, this model allows the companies to
understand if their location of operations offers them any particular advantages over competition
from other nations (Holtbrügge and Friedmann 2016). Therefore, Porter’s Diamond model helps
companies to improve their competitive merit by understanding if they face any particular
disadvantages as the result of their business locations. The model helps me influencing the
business decisions of companies particularly to different companies that have never had a
question of how to improve their competitiveness in mind before.
Competitive advantage for companies
Competitiveness of companies is the leverage that the business posses over its rivals.
According to Porter’s Diamond model, companies can gain competitiveness in the business
sector by offering clients better as well as the greater value of services and products. The
companies can focus on the idea that deals with advertising products or services with lower
prices of a higher level of quality that will then piques the interests of consumers (Maari 2018).
Most targeted markets by companies always recognize these exclusive services or products being
offered by companies within the international marketplaces. The improved techniques of
advertising and improved quality of products are the major reason behind the loyalty of brand or
why consumers prefer a particular service or product over another. The model proposes that the
presence of value propositions among companies remain to be one of the essential factors when
understanding the competitive advantage. If the value proposition of any company is active over
its chief rivals, then the company can be able to attain high-cost advantage and differentiation

Implications of Porter’s diamond model for companies’ competitiveness 7
advantage (Omsa 2017). The model illustrates that cost advantage is when business offer similar
product together with services as its rivals in the market, albeit at the lesser cost. However,
differentiation advantage in operations of companies is when the business offer similar products
as its rivals. Consequently, in the view of Porter’s Diamond Model, strategic management of
companies that aim to be competitive should be concerned with creating as well as sustaining
competitive merit in their operations.
Competitiveness among companies seeks to address some of the criticism of comparative
advantages. The competitive merit within companies resets on the idea that affordable as well as
cheap labor is ubiquitous as well as natural resources in operations are necessary for a good
economy (Jarungkitkul and Sukcharoensin 2016). According to this model by Porter in the
competitiveness of companies, it attests that competition among companies can direct various
nations to concentrate in exporting main products together with raw stuffs that trap different
companies in low-pay finances. Such instances of low fiancés do arise in operations of
companies due to the terms of operations in different marketplaces. Competitive merit tries to
approve this concern by emphasis on maximizing scale finances in actions together with yields
that acquire best charges (Chen, Liu, and Zhang 2017). Therefore, from all these ideas on the
competitiveness of companies, it is clear that the model of Porter’s Diamond was developed
based on appropriate research in the market.
Factors that affect the competitiveness of companies
Porter’s Diamond Model shows that different factors influence the competitiveness of
any nation together with its companies. Some of the essential factors that this model has recorded
comprise of power of bargain of different buyers and suppliers, pressure of new competitors,

Implications of Porter’s diamond model for companies’ competitiveness 8
intimidation of alternate products together with rivalry of the company (Maari 2018). All these
factors are the basic determinates of competitive advantage of the company. Some of the issues
that decide the competitiveness of companies consist of situation of various demands for
products and services (Gould and Desjardins 2015). Other factors comprise the presence of
supporting industries, the presence of supporting company strategies, together with factor
conditions in operations. For instance, in competitiveness factor conditions refers to the
resources of a nation that comprises of labor together with natural resources, while conditions of
the demand stand for local demand for the services and products of the organization.
The forces presented with model of Porter’s Diamond can be essential in determining
spirited environment of the company that further affects profitability during operations. The
power of bargaining among buyers along with suppliers affects the small organization’s capacity
to increase prices together with costs of managing operations respectively (Pokras 2017). For
instance, if similar products are present or available from different suppliers, then various buyers
within companies have bargaining power every supplier. However, in the case when there is one
supplier only f0or the specified component or product, then that supplier have great bargaining
authority over its targeted customers. Additionally, instances of low entry barriers attract
completion, while instances of high-entry barriers tend to discourage bargaining power. For
instance, the idea of different companies of opening the home-cleaning business operations is
simple, but commencing the manufacturing company is a term to be tougher (Herciu 2014). The
rivalry of companies is probable to be higher when various organizations are vying for the
typical clients as well as intense rivalry results to lower profits along with prices.

Implications of Porter’s diamond model for companies’ competitiveness 9
The model stated that the policies of different governments within several nations could
impact the operations of companies. For instance, the model suggests that instances of lower
income taxes stimulate the demands of various consumers that later leads to increment on the
number of sales together with profits that different companies get in business operations (Chis
and Tirca 2017). Besides, companies within countries that invest in education tend to have the
skilled laborers that assist different companies in engaging in several types of research as well as
development. The presence of supporting companies near companies that deal with
manufacturing of products can reduce input costs and increase their revenue during operations.
Some of the supporting industries for companies comprise of dealers of raw stuffs together with
section producers. The viable industry framework is also vital because different organizations
that can endure stiff rivalry at home are always capable of withstanding even tougher completion
in the international business setting. The model also explains that the presence of a cluster can
affect the competitiveness of companies (Bashiri, Baziyar, Balakshahi, and Mojib 2015). For
instance, the cluster remains to be geographical concentrations of interconnected organizations.
The high-technology cluster in operations might comprise of hardware together with software
companies situated in the similar region along with learning centers and agencies that deal with
governmental research. Therefore, the cluster is a major factor that impacts the competitiveness
of the companies. For instance, the clusters can impact competitive business settings by
increasing the productivity of different organizations in every cluster (Abdolshah, Moghimi, and
Khatibi 2018). The cluster an also help in encouraging different entrepreneurial operations in
various companies through the process of driving the speed together with speed of innovation.

Implications of Porter’s diamond model for companies’ competitiveness 10
Forms of generic competitiveness strategy used by companies
According to Porter’s Diamond strategy, there are key approaches that are applied to all
business operations of the companies. These approaches are either service or product base in
nature (David 2019). This strategy that is used for competitiveness by the companies consists of
leadership, differentiation, together with focus strategy. Furthermore, these strategies within the
operations of the companies have been developed to enhance as well as competitive gain merit
over rivals around different markets (Pokras 2017). Besides, these competitive strategies within
operations of the companies are also categorized as the comparative merit together with the
differential advantage.
Cost leadership strategy
Cost management is the capability of a business to create service that will be at the minor
charges than additional rivals in markets. If the operations of companies can produce similar
quality of products, but it sells it for less, this offers the companies competitive merits over other
organizations (Wonglimpiyarat 2018). Therefore, the strategy offers the price importance to
clients. Besides, reduced prices will give rise to higher revenues as trades within companies are
still creating logical revenue on every examination they offer as well as goods that they
manufacture. Porter’s Diamond Model recommends getting the lower-cost foundation such as
materials, facilities, and labor (Maari 2018). The strategy offer business the lower cost of
manufacturing over its competitors.
Differential strategy
According to Porter’s Diamond model, differential merit is when the products and
services of companies are different from their competitors in the market. The model recommends

Implications of Porter’s diamond model for companies’ competitiveness 11
that making different goods and services attractive to stay up above from their rivals (Liu and
Lin 2017). The model explains that different business needs strong study, advancement and plan
thinking in order to develop modern ideas. These enhancements to the yields or service might
focus on providing high superiority to clients.
Focus strategy
According to the model, the hub strategy preferably tends to attain operation of
businesses to focus at a little aim marketplaces before testing to aim at every operator in the
company. The plan is always utilized for businesses given that they might not possess adequate
possessions or capacity to aim at every operator (Herciu 2014). Therefore, companies that utilize
this strategy regularly concentrate on different wants of the targeted customers. The companies
that use the method also focus on how their services or products could enhance their day-to-day
operations.
Conclusion
It is clear that during the process of comparing the competitiveness of different
companies, nations need to be grouped about different similarities in terms of financial scale as
well as structure. The discussion highlights that major elements in Porter’s Diamond model that
affects the competitiveness of companies comprise of rivalry, firm strategy, conditions of
demand, and factor conditions during operations. However, chance and government policy have
been the term to be some of the elements that sit outside the model and influence the other
factors within the competitiveness of companies. Therefore, demand conditions can assist
companies to innovate faster as well as to develop more advance yields than those produced by
their competitors. The use of firm strategy, structure, and rivalry creates more pressure for

Implications of Porter’s diamond model for companies’ competitiveness 12
companies to focus on innovation in order to upgrade their competitiveness within the business
setting. It is apparent that government helps to invent various ways of improving supply
conditions of the company that is significant for increasing the company’s productivity and
conditions of demands for various products in the market. Therefore, by the use of Porter’s
Diamond model, the company can gain a better understanding of their operations.

Implications of Porter’s diamond model for companies’ competitiveness 13
List of References
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Bakhshinejad, M. (2014). Porter’s Competitive Advantage Model and its Application in Bottled
Drinking Water in Iran. Agricultura Tropica et Subtropica, 47(2), pp.60-67.
Bashiri, M., Baziyar, M., Balakshahi, A. and Mojib, L. (2015). Analysis of Various Aspects of
Olive Exports Based on Porter's Diamond Model. Singaporean Journal of Business , Economics
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Chis, A. and Tirca, A. (2017). Improving Competitiveness- Porter's Model in Romanian
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Implications of Porter’s diamond model for companies’ competitiveness 14
David, A. (2019). Porter’s Competitive Strategies Influence on Performance of Mobile
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Implications of Porter’s diamond model for companies’ competitiveness 15
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