Logistics and Supply Chain: Porter’s Diamond Model and Market Entry Strategy

This article discusses Porter’s Diamond Model and Market Entry Strategy for Logistics and Supply Chain. It explains the factors that drive competitive advantage to a country and its economy. It also elaborates on the advantages and drawbacks of different market entry strategies like Foreign Direct Investment, Joint Venture, and Greenfield Investment.

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Contents
Part 1: Porter’s Diamond Model......................................................................................................1
Part 2: Market Entry Strategy..........................................................................................................5
Part 3: Contemporary Management Issues......................................................................................7
References........................................................................................................................................9

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Part 1: Porter’s Diamond Model
Porter Diamond Model is a National Advantage Theory that is formed to provide upper hand to
the countries and organizations due to several aspects present to them in the external market.
This model was developed by Michael Porter who successfully analysed the company strategy
and fiscal competition and need to implement the national advantage strategy. This model
explains the factors that drive the competitive advantage to the country and its economy as well.
This model evaluates the ways in which organizations can competitive advantage using
competitiveness of the country in the worldwide environment (Mishra, Rao, Monga, &
Vishwanath, 2016). This model focuses on the reason why certain industries in some nations
gain advantage in the worldwide view where as others do not work effectively. Thus, it can be
said that this model helps the companies in determining whether it is profitable to invest in
certain departments of the county or not (He, & Lin, 2016).
This factor argues the capability of the organization to strive in the external international
environment and how the company can attain location advantage from the country. Several
factors present in this model that affect the strategic condition of the country and the company
are labour, knowledge, government and culture. Talking about the solar renewable energy
industry of the country India, the fact should be noted that the industry has seen major growth in
the past few years and is expected to grow progressively in future as well (Kharub, & Sharma,
2017). The overall renewable industry is fourth most attractive renewable energy market present
in the world. The country is ranked at the fifth position in the solar renewable energy capacity
that makes the industry resourceful and innovative for an international organization to invest in
the country.
Talking about the solar energy of the country, the fact should be noted that this industry
specifically in the renewable industry has immense future growth as the government of India is
aiming to install 100 GW of solar power in India by 2022. This contract will be given to an
organization present in the Indian solar industry. So, it can be said that the entry of the company
in this segment currently will be profitable. As the earlier target of government was 20,000 MW
which has now increased to 100 GW. However, the company Tata Power Solar will give biggest
competition to the company in the Indian industry. Major large scale solar projects are conducted

Logistics and Supply Chain 3
by Tata group only. Thus, this will provide competitive difficulty to the business to grow in
Indian market. Secondly, considering the demand factor of the industry, it should be noted that
more companies have started to towards corporate social responsibility in the environment.
Resulting to which, they are insisted to use solar power against electricity in India. The solar
revolution has led the companies to set up megawatts and large solar parks in India. Solar lines
are setup at remotest Indian villages so as to provide them solar energy. Thus, considering the
factor condition aspect of the Porter diamond model, it should be noted that there is less
availability of solar power in several parts of the country which is profitable for the business
there is more work to do for the business in India. Whereas if the company will enter in another
country where solar lines are already placed so they would not be able to attain sufficient sales in
the market.
Further, it should be noted that this model is framed to analyse the upper hand advantage that
certain countries and group attain due to various circumstances or favourable factors available
only to them in the external international environment (Kharub, & Sharma, 2016). With the help
of this model, the organization aiming to invest in this industry can successfully analyse the ways
through which they can increase their profitability. The primary factors on which the success of
the country in dependent include population, location, natural resources and land. Apart from the
four factors that are linked with the country features, there are four factors present in the model
that are firm strategy and rivalry, factor conditions, related and supporting industries and last
demand conditions (Li, & Zhang, 2018). Further, below mentioned is the elaboration of the
model along with the analysis of the favourableness of Indian solar renewable energy industry to
work for the European company:

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Firm Strategy and Rivalry: the first factor of this model explains the level of competition present
within the industry of the country that challenges the companies to operate innovative activities
in the business environment. This factor defines the level of competition that halts the growth of
certain companies from delivering certain products and services to the customers and attaining
competitive advantage from them as well. High degree of competition present in the country also
keep several companies on their toes to implement innovative features and consistently work to
increase the satisfaction level of customers in the external business environment (Rodrigues, &
Khan, 2015).
Looking at the firm rivalry aspect of the solar industry, it should be noted that there is average
tax rate in the country but high restrictions to enter and attain license. However, Greenpeace
initiative led in India is providing better opportunities to companies to enter and sustain in India.
High corruption can be seen as a condition where the company might have to spend more than
expected. Bribery in India is prevalence to maximum extent.
Considering the case of solar renewable energy industry of India, it should be noted that the
country has variable attractive features that increases the competitiveness of the country due to
which it can be assumed that the country has high degree of competition as well. So, if the
company enters in the solar renewable energy industry of India then it means that the business

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will have to face high degree of competition along with it. The country has fourth largest
installed wind capacity along with sixth largest installed solar capacity as well. The government
of the country has formed various policy measures that address risks plaguing of the sector
(Jarungkitkul, & Sukcharoensin, 2016).
Factor Condition: The factor conditions under the Porter Diamond model focuses on the
domestic homebuyers of the country or the local target market. The segment talks about the
target segment of the country that is well aware of the market and product features and prefer
using products that are innovative and hold good quality as well. These people prefer home
ground products rather than the products that are served to them using international labels. The
market segment focuses on purchasing those products from the environment that have domestic
label and are made in the nation itself (Kumar, Kumar, Baredar, & Shukla, 2015).
The factor inputs in the country also show benefits for the companies, as there is cheap labour
and efficient space and infrastructure as well. Several industries in India has announced the rule
that major firms will now optimize solar plant in their factory setup so as to reduce the use of
fossil fuel in the market. Thus, it should be noted that most of the factors present in the country
are favourable for the company to function its growth. However, there are several factors that
increase the restrictions and boundations for the company as well. There is high chance for the
companies to attain profitability if they enter in the solar energy industry of India.
Further, considering the case of Indian solar renewable energy industry, it should be noted that
the company would easily attain labour in the environment at cheap rates as well. There are more
people present in the country who are willing to work due to which getting labour is feasible but
the company need to train them to increase their skills and efficiency. Further, the country has
setup several special economic zones in the country that helps the foreign companies to attract
location and work on their motive. The country has several fossil fuels and locations where solar
renewable energy sources are available. Thus, the location requirement can also be easily
fulfilled, only the company has to develop the infrastructure to study and extract resources for
the nation (Chandel, Shrivastva, Sharma, & Ramasamy, 2016).
Related Supporting Industries: in order to implement the overall growth and success of the
company in a foreign country, it is very important to company to attain links with all the industry

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domains and attain help from them. No business can grow alone without taking help from other
partners. So, according to this segment of Porter’s Diamond model, it is important for the
particular industry of the country to have interconnected relationship with other helping
industries. This type of relationship will help both the parties to grow and flourish their business
by making use of a holistic approach. This segment talks about the upstream and downstream
industries that improve the exchange of information and promote a continuous flow of help by
exchanging ideas and useful resources as well (Tsiligiris, 2018).
Secondly, this industry in India works under the surveillance of the government of the country,
so no organization thinks of not helping such industry and attracting eyes of the government on
them. Thus, it should be noted that the solar renewable energy industry has links with most of
industries present in the nation. The company would not face any difficulty in this case because
of the solid binding relationship of the industry with various other segments present in the
country (Sahoo, 2016).
Demand Conditions: This factor of the Porter Diamond model elaborates the factors that
pressurise the demand and supply of the products in the particular industry. The demand
conditions elaborate the favourableness of the company to work in the industry. The weather
conditions, capital, education, infrastructure, perception of the customers etc. belong to this
segment of the model. The demand conditions in an economy keeps on fluctuating due to the
perception of the customers and changing environmental factors as well. Greater pressure is
faced by companies so as to improve their level of competitiveness by introducing innovation
and high quality products in the environment (Chung, 2016).
Lastly, the government also plays an important role in changing the circumstances for the
company in the solar renewable industry. The government can act as a catalyst to motivate the
company to earn profitability in the business environment. Whereas, the government also works
as challenger in halting the growth of the companies and creating barriers for them in work field.
For the European company aiming to enter in Indian solar renewable industry, it should be
concluded that the industry is highly competitive and thrives innovation to work upon
(Holtbrügge, & Friedmann, 2016). Government has organized Ministry of New and Renewable
Energy (MNRE) that has created a database of solar energy potential in the country. This
ministry is significantly helping companies to increase productivity and profitability in the Indian

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environment as well. The government offers subsidies to companies manage their losses and
develop the country as well. The electricity centre of India is dominated by fossil fuels and
government is aiming to convert them (Sangroya, & Nayak, 2015).
Part 2: Market Entry Strategy
Foreign Direct Investment is a market entry strategy that helps an organization to enter in
another country and initiate their business operations for profitability in that market. This type of
investment is made by the organization in one country for the purpose of business activities.
Generally, the foreign direct investment activities takes place when the investing company
develops foreign business activities or acquire the foreign business assets including ownership as
well. Joint venture is a market entry mode that helps the business to operate its business in
foreign market. The joint venture entry mode helps the business to acquire another undertaking
from similar or diverse industry present foreign country (Buckley, 2016).
The foreign company in which the organization acquiring can be assumed as the ticket for the
organization to enter in market. Talking about the advantage of using this type of market entry, it
should be noted that this process helps the organization to get access to new capacity and
expertise in the diverse market as the organization can effectively make use of the resources of
the acquired organization as well. This process also helps the business in sharing risk with the
venture partner and initiate flexibility in the business as well. This type of strategy also initiates
easy separate strategy as well. One business can sell their share to another business to dissolve
the joint venture relationship in the environment (Papadopoulos, Hamzaoui-Essoussi, & El
Banna, 2016).
Along with advantages, there are several drawbacks of using process like this entry strategy
require time and efforts to build right type of relationship and partnering with another business
other difference in opinion can create challenges for both the organizations to operate their
functions effectively in the external market. Also, the objective of this type of business is not
100% clear to any of the party involved in this process. Difference in culture, style, objectives
etc. can create conflicts in the organization. Poor integration and cooperation can lead to failure
in the business objective in the external environment (Buckley, & Ghauri, 2015).

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Another type of market entry strategy is Greenfield investment strategy that helps the business to
enter in the international business market without forming relationship with any other
organization. This type of organization constructs new set up for the business in international
market. This process helps the organization to set up new branch of the business at cross border
from the ground up. This type of entry strategy is usually initiated by the companies that want to
achieve the highest degree of control over the foreign market. Further, potential tax breaks and
subsidies are also provided to such organization in the international market. Further, there are
several advantages of this type of market entry like by using this process, the organization attain
maximum level of control on the functions of the business (Tulung, 2017). There is no presence
of interference of any of the party in the business functions. There is presence of high control
over the manufacturing and sale process that helps the organization to solely attain all the profits
acquired by them in the external international market. The companies can bypass the trade
restrictions by using this type of market entry strategy. Economies of scale and economies of
scope can be attained in the business functions by using this type of strategy in the external
international environment. The process of Greenfield investment also the country in increasing
the employment rate as well (Jones, & Wren, 2016).
Furthermore, talking about the drawbacks of the using this type of strategy, it should be noted
that in this type of entry, the organization attains high degree of risk of investment. As under this
process the organization is the sole undertaking to enjoy profits so it attracts high risk and
investment as well. There is comparatively high entry cost in this type of process and it is the
most risk for foreign direct investment. There is high degree of government regulation under this
type of investment along with high fixed cost as well (Tripathi, Mishra, Dubey, Tripathi, &
Baredar, 2016).
Thus, it should be noted that the business should not make use of this type of market entry
strategy because it involves high government intervention along with high risk as well. the
European organization should enter in the Indian solar renewable industry by the form of joint
venture. The company should look for another prospective organization present in the domestic
market that can help them to sustain their position in the international market. Thus, it is
recommended to the company that they should make use of joint venture market entry strategy to
enter in the market of India (Ang, Benischke, & Doh, 2015).

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Part 3: Contemporary Management Issues
Below mentioned are the two key management issues that should be considered before operating
the business functions in India:
Issues in adopting technology: from the Porter Diamond model mentioned above, the fact is
true that it is important for the organization to make use of innovative and hi-tech technology to
grow and increase competitiveness. However, the business also needs to take care of the fact that
they do use technology to the extent that they can handle. Technology is a resource but it can
also be harmful for the organizations if not used wisely, so the company should focus on using
technological resources that the employees can manage to develop competitiveness from it.
Technology keeps on changing with the development of the environment and changes in it but
the company should adopt technology only when it is required by the business. Procurement of
technology requires heavy cost in the environment as well. So, the business does not have
enough resources to invest in technology factor. Thus, it should be noted that the company
should use technology in their business process wisely; otherwise, it will eliminate its
competitiveness and will create difficulty in regular operations as well. Also, in India there is
lack of skilled labour that hold the efficiency to make use technology easily for the growth of the
business. Thus, it should be noted that in this way, the business would spend more than required
cost in procuring the technology as well as training the labour as well (Luthra, Kumar, Garg, &
Haleem, 2015).
Issues in acquiring skilled labour: in India, the company will face lack of skilled labour in the
business environment. There is lack of availability of labour in the environment due to which
efficiency of the business process reduces. The company need to invest in training the employees
to make use of machineries and technology as well. The company would be able to easily
procure uneducated and unskilled staff but they would require training the staff effectively
otherwise they will create major issues in the organization. It is important for the human resource
manager to train the staff otherwise they will hamper the productivity of the company. The
company also needs to take care of conflicts arising in the organization. The management need to
develop an effective performance management program so as to train the employees and retain
them in the business process. Manpower is the most important resource of any organisation and
if the manpower is not effective then all the other resources of the company will not provide

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sufficient results to the business (Jolly, Spodniak, & Raven, 2016). Thus, it is important for the
business to focus on treat the employees well so as to increase the productivity of the business in
the external international market.

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