Understanding Porter's Diamond Model for Competitive Advantage

Making sense of strategy 1
Making use of strategy
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Making sense of strategy 2
Question 1
Introduction
Classical theories used in global and international trade depicts comparative
advantage to factors endowed in a country that it is fortunate to inherit. (Adams, 2012) Such
endowment includes the size of population, land, vast natural resources and labor. (Porter,
2008) argued that a country can create fresh factor endowments such as government support,
modern technology, skilled labor, and a robust knowledge base. Therefore, Porter used a
diagram, which is diamond shaped, as the basis of support to his arguments. The framework
has been used to explain the various national playing field that different countries have
established for their industry’s success. The points used in the diamond solely affect four key
ingredients that normally lead to a country’s comparative advantage. These include the
available skills, information, and intensive resources that are used by organizations to decide
which opportunities to follow, the goals of various entities in companies and the pressure on
those businesses to invest and innovate. (Porter, 2008)
As a policy and strategy expert, one would reiterate and affirm the diamond’s
framework in that firms gain competitive advantage under certain conditions. Three
conditions have been set up in the theory. These include if a home base out rightly allow
accumulation of skills and assets if goals of managers, owners, and employees owners
possess the intense commitment and sustained investment and in companies where the home
base can afford better information and insight into various products and process needs.
Therefore, this would create a fundamental shift in the creation and assimilation of useful
knowledge by nations to gain more advantage in foreign direct investments. (Boyes and
Melvin, 2014)

Making sense of strategy 3
Standard economic theories attribute production factors such as labor, land, skilled or
unskilled resources, income capital, and infrastructure in determining the course of trade.
(Hatti, Singer and Tandon, 2013) Factor conditions, as explained in the diamond of national
advantage, relates a countries position in these factors which are essential to compete in any
industry. These production factors can be arranged in a hierarchy where on the lowest level
we have basic and generalized factors such as unskilled labor and raw materials, while
specialized and advanced factors such as educated and motivated labor, are on the higher
level. (Van Den Bulcke, Verbeke and Yuan, 2010) Therefore, one can argue that advanced and
specialized factors are vital for sustained and heavy investment in a given industry. Porter
argues that having a general high school or college education does not entirely represent a
competitive advantage in the modern global competition but what is important are factors
which are highly focused to an industry’s specific wants and needs. These factors are
uncommon and difficult to imitate and also require continuous investment to be initiated.
(Hatti, Singer and Tandon, 2013)
Competitive advantage results after the creation of specialized factors by leading
institutions and then continue working in their upgrade. (Boyes and Melvin, 2014) As a strategy
and policy expert, one would argue that the stock of factors by themselves are not what is
important in the sophisticated and advanced economies but how efficiently they can be
created, deployed and upgraded in the specific industries. A nation can, therefore, attract and
retain foreign direct investments by encouraging its companies to position themselves in the
market in innovation and upgrade before its foreign rivals. This active rivalry creates pressure
and company goals hence initiating a driving force in the innovative process leading to
constant commitment in the industry. (Huang et al., 2015) In order to do this, however,
favourable conditions should be present elsewhere in the diamond’s framework.