Birmingham MBA: Porter's Diamond Model of National Competitiveness

This report critically discusses Porter's Diamond Model of National Competitiveness, focusing on its relevance to Singapore's economy. It examines the four key dimensions of the model: factor conditions, demand conditions, related and supporting industries, and firm structure, strategy, and rivalry. The analysis incorporates real-world examples from Singapore, such as the DFS Group's employment retrenchment policy and the food and beverage industry's adoption of technology. The report also explores the impact of government policies and the influence of competitors on the competitiveness of businesses in Singapore. The report highlights how these factors interact to shape the economic landscape and determine Singapore's competitive advantage in the global market, considering the challenges posed by economic conditions and international trade dynamics.

Running head: PORTER’S DIAMOND MODEL OF NATIONAL COMPETITIVENESS
Porter’s Diamond Model of National Competitiveness
Name of the Student
Name of the University
Author Note

1PORTER’S DIAMOND MODEL OF NATIONAL COMPETITIVENESS
Executive Summary
The objective of this paper is to highlight the importance of Porter’s Diamond Model in the
economy of Singapore. The four important dimensions of the model has been explained in this
paper incorporating the real-life examples. The inclusion of the real-life example has enhanced
the quality of the analysis of the paper. The examples have been drawn from the reliable
resources. Having been recognized as tigress of the Asian Economy, Singapore holds a
remarkable market strength across the world. Its advanced technology, skilled labor force and
developed service sector are considered as the fundamental pillars of the robust economic over
the last decade. However, unrest economic condition, like, international trade war, financial
crisis and geo-political strive trigger a serious challenge to the macroeconomic policymakers in
Singapore.

2PORTER’S DIAMOND MODEL OF NATIONAL COMPETITIVENESS
Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................4
Factor conditions:......................................................................................................................5
Demand Condition:....................................................................................................................6
Related and Supporting Industries:...........................................................................................7
Firm Structure, Strategy and Rivalry:.......................................................................................8
Opportunity:................................................................................................................................9
Government:.............................................................................................................................10
Conclusion.....................................................................................................................................12
Reference list.................................................................................................................................14

3PORTER’S DIAMOND MODEL OF NATIONAL COMPETITIVENESS
Introduction
The economy of Singapore is highly developed, business-friendly and trade-oriented. This
sovereign city-state is one of the alluring business hubs for both national and international
investors. Its position among top five economies in terms of the Ease of Doing Business Index
describes its strong position in the international market. As per the data, the economy offers least
corrupt financial market to the corporate companies. The per capita income of Singapore is
registered around US$ 55,000 (approximately) in 2019 which highlights the strong purchasing
power of the consumers. The consumers are capable of spending money as to get quality product
and services from the market (Chiu 2018). Apart from the demand, an investor should entail
sound knowledge, local business laws and establishment costs about the market structure of
Singapore. The companies always attain to extend the business on which they hold competitive
advantage with respect to their rivalries. Competitive advantage is generally determined by the
degree of the opportunity cost. The company will be considered to have competitive advantage if
the opportunity cost is least for the particular product. The economists have found that the
company achieves this economic advantage due to different economic variables. Some basic
factors are always important for specific type of industry. For example, agricultural firms are
relative labour-intensive than the technology firms. Therefore, the agricultural firm should
overhaul whether the domestic or foreign country is enrich in labour and land.
According to Porter’s Diamond model, every country owns competitive advantage in
particular industry. The certain model is the reflection analytical study of ten nations. This study
examines how a country competes with its overseas rivals in trade sector (Vlados 2019).
Economic environment, trade and institution policies have been observed to have critical role in
determining the competitive advantage position of the country. The study is conducted across

4PORTER’S DIAMOND MODEL OF NATIONAL COMPETITIVENESS
several developed nations considering Denmark, Japan, Germany, Sweden, UK, Singapore,
South Korea and the USA. The model has covered over hundred case studies across all the
considerate economies. This model allows the country to identify and focus on the factors which
can lead the economy to have the competitive advantage.
Discussion
Singapore is technically developed. The economy prefers to produce capital-intensive
products and services. Less than 0.90% of land area is devoted to the agricultural work. Its rich
arable land is not appropriate for the agricultural work. However, the country has been
experiencing significant population growth over the last decade. Overwhelming presence of
multinational technology companies and advanced service sector has intensified the number of
migrated labours into the economy. As a result of that cumulative demand and supply is
continuously rising (Pan et al. 2015). In this regard, several foreign companies express their
interest to establish their business units to meet the evolving market demand of Singapore. On
other hand, the economy should develop its export promotion policy for the effectively
consumption of economic resources. The domestic companies in Singapore should export gadget
to other nations. This will improve the company’s revenue due to the application of the advanced
technological resources (Woharn and Sahaya 2017). The effective way to apply the management
model is to identify the abundant resources of the company. This will help to develop an
effective production strategy with the help of available resources.
Porter acknowledges the interaction of four factors is responsible for the economic
advantage. The four factors include demand and supply conditions, structure of supporting and
related industries, and business strategy of competitors. Apart from that, role of the government
is another key factor which can deeply influence these four factors. Implication of government

5PORTER’S DIAMOND MODEL OF NATIONAL COMPETITIVENESS
policies, such as, tariff and trade restriction inevitably brings changes in the consumer demand
for the foreign products. Meanwhile, the presence of strong competitors triggers a serious
challenge for any individual (Riasi 2015). As per the economic theory, competitors make both
demand and supply more elastic with respect to business strategy of the competitors. The four
key determinants are explained as follows:
Factor conditions:
It is the composite function of human resources, knowledge resources, physical
resources, infrastructure resources and capital resources. All these resources act as compulsory
inputs to augment the production of the company. The model states that the company will be
able to continue smooth production if it consists of sufficient resources including all basic and
advanced factors of production. The basic denotes to the natural resources, sufficient access to
the international market and location facility, whereas, modern infrastructure and highly skilled
labour are recognised as advanced factors (Wonglimpiyarat 2017). All these factors are
accommodated to the available labour in the market to perform the production activity. It is the
duty of the company’s management to allocate the resources as per the requirement. The proper
collaboration of the basic and advanced factors results in the enhancement of the market share of
a company. In this regard, the company should overhaul the status of the important factors as to
maintain the balance among the available resources of the company (Chung 2016). The presence
of adverse condition, like, deficiency in the raw materials and labour input may raise question on
the production capability of the company.
Contextually, some companies have been found to bring changes in the human resource
policy to boost the company’s performance. Recently, DFS group, the travel retailer of
Singapore, has taken employment retrenchment policy as to reduce the cost related to the

6PORTER’S DIAMOND MODEL OF NATIONAL COMPETITIVENESS
unproductive units (Rodan 2016). The company has decided to close duty-free retail stores
located at Changi Airport. More than hundred people are expected to lose their jobs during the
retrenchment policy. The management has observed that the company’s revenue has deteriorated
by a significant level due to extravagant expenditure on the employees. This action is expected to
help the company to enhance the product quality through changing the fund allocation
(Wonglimpiyarat 2018). In this way, DFS group can invest a considerable amount on the
technology development. Production quality is the key indicator to keep the market strength in
respect of the competitive market.
Demand Condition:
According to Porter, demand is the composite characteristic of different economic
parameters. Income, taste and preference of the consumers are the influencing factors for the
average demand. The growth pattern is deeply influenced by the globalization of the domestic
demand. The author considers that domestic market is more important than the international
market. Domestic consumers react directly to the change in the market structure of particular
product. Company adopts the new technology into the production process if the consumer
demand gets satisfied (Yeung 2017). A nation can enhance the competitive advantageous
position if domestic buyers are responsive with respect to the evolving technical facilities. The
consistent support from the domestic support encourages the firms to adopt advanced and
innovative technology in the production process. Meanwhile, it is important to mention that
unrest economic situation deeply influences the aggregate demand of the economy (Vlados
2019). Considering the fact, the economy of Singapore is expected to face sluggish economic
growth in future following the trade war between China and the USA.

7PORTER’S DIAMOND MODEL OF NATIONAL COMPETITIVENESS
Recently, the food and beverage industry in Singapore has been experiencing remarkable
changes in terms of consumer choice and preferences. The food industry contributes more than
$20 billion coupled with 5 lakh people. The exploration in the urban population has brought
significant changes in the taste and preferences for the local food products. The growing fast-
food chain asserts that there is considerable consumer demand for the fast food in Singapore. The
recent digitalization of the food and beverage companies is expected to receive immense
consumer demand (Zhang 2017). Most of the food and beverage companies are planning to
adopt advanced technology plan supported by artificial intelligence system. For example, Fraser
and Neave Ltd has been trying to incorporate artificial technology into the logistic and service
system. This will strengthen the supply service and will be capable to over large number of
customers within short-time period.
Related and Supporting Industries:
The presence of great number of substitute industries is the great concern for the
companies developing market strategy. The company must understand which production process
offers low opportunity cost as compared to other commodities. This implies that economic
resources will be used to its optimum level in terms of its competitive advantageous position
(Fainshmidt, Smith and Judge 2016). The presence of substitute industries offers ample product
options to the customers. This turns the produce demand more price elastic implying that
demand will be changed to large extend in response to the minor change in the price level. The
consumers will start to consume other goods if the price of the initial goods gets declined.
Therefore, the demand of competitive market, like, technology market is highly sensitive to the
price structure (Tan 2016). The data reveals that most of the established technology companies
have lost their customer numbers owing to the inappropriate price strategy of the rivalry firms.

8PORTER’S DIAMOND MODEL OF NATIONAL COMPETITIVENESS
From the real-life example perspective, the airline industry is one of the strongest
industries in Singapore. The airport service is famous for providing quality and public service to
the customers (Kharub and Sharma 2017). It is considered as the important aviation hub of the
Southeast Asia. The airport serves average 90 international flights covering 60 countries and 200
cites. The airport service seems like have a monopoly power in the domestic aviation industry
due to the absence of the main competitors (Heracleous and Wirtz 2014). Meanwhile, the
demand for BreadTalk is relatively price elastic due to the immense pressure from the
competitors. This food company face competition from both domestic companies, like, Four
Leaves and My Bread. BreadTalk is the food retail chain of Din Tai Fung restaurants. Its
diversified bakery items and innovative production process is the key driver behind its strong
product demand. However, the company has been experiencing declining demand due to the
deteriorating quality issues of the bakery products. a several number of complains have been
lodged against the company due to the deteriorating quality service (Tan, Lean and Khan 2014).
As a result of that the company has closed manufacturing units across Singapore.
Firm Structure, Strategy and Rivalry:
For instance, Asia Polyurethane is expected to face downsize impact in response to the
trade conflict between the USA and China. The revenue of several manufacturing units under the
company has been diminishing since the last couple of years. The revenue is stated to get
declined by 20% in recent year following the trade restrictions imposed by the Chinese
government (Yeung 2017). As a consequence of that, the export oriented company has received
falling consumer demand influenced by back orders. The economic recession cuts down both
private and construction demand, which in turn, aggravates the wage pressure on the foreign
workers (Lim 2016). The diminishing production demands less manpower for the manufacturing

9PORTER’S DIAMOND MODEL OF NATIONAL COMPETITIVENESS
process. The growing uncertainty prompts the manufacturers to cut the production cost as there
is a growing probability of low return in the investment.
Referring to the real-life example, the software development companies in Singapore
have been suffering from economic losses due to overwhelming presence of the foreign software
development firms. Wasko is one of the important software development companies in
Singapore. The company holds resilient customer strength owing to its reliable and quality
technical support to its customers (Tremewan 2016). It provides exceptional technology
solutions and services to its consumers. However, the company is struggling to hold its market
share due to the evolving presence of the foreign rivalry companies, like Microsoft and Apple.
Both these technology giants have been reported to open a number of retail chains in Singapore.
This will inevitably cause a detrimental consequence on the domestic consumers.
Opportunity:
The technology sector coupled with the service sector is stated to contribute around 75%
to the country’s GDP. Its advanced design and technology of the gadget has boosted the
consumer demand in the technology sector. Singapore id expected to have vast business
openings in the international semiconductor industry. The manufacturers of the technology
products are aimed at developing a sustainable production strategy for the local electronic
manufacturers. The advanced technology market may turn Singapore as a pivotal technical hub
in Asia (Jinachai, Anantachoti and Winit-Watjana 2016). The study has identified that the
customers are also looking for technically improved electronic gadgets. The evolving consumer
demand in the local market allows the foreign companies to expand their electronic business in
Singapore. For example, Apple, the international giant technology company, has decided to open
its retail stores across the country (Lazzarini 2015). This will bridge a direct connection between

10PORTER’S DIAMOND MODEL OF NATIONAL COMPETITIVENESS
the customers and retail suppliers. Instead of that, the impressive growth of the digital marketing
beckons an important signal to the aspiring investors. The emergence of new technologies and
innovations seems like a driving force of the economic prosperity of Singapore.
Digital marketing is the growing concept in the international economy. It has accrued
immense customer support owing to its persistent customer service and reliable customer
service. Moreover, the country has been trying to incorporate the clean and green technology.
Around five green technology companies have invested approximately $150 million in 2015.
This is a part of the economy’s sustainable economic development policy. Fossil fuel energy is
proposed to be exiled within next couple of years. Therefore, international business for
technology sector approaches great opportunity for the aspiring businessmen in Singapore
(Corporateservicessingapore.com 2020). In terms of real life example, AET, the leading
petroleum vessel of Singapore, has adopted has adopted green technology to protect the
biodiversity of the aquatic environment. Following this initiative, the carbon emission is
expected to get declined by 40% within 2050. Samsung Heavy Industries has collaborated with
this ship developer during the eco-friendly vessel building process. This example beckons that
vessel companies originated from Singapore can achieve a significant growth in the export sector
due to comparative advantage in the fleeting service.
Government:
It is considered as the most important element to boost the company’s growth. It has been
observed that company will be able to improve the production due to implication of effective
government strategies. Suppose the government decides to provide subsidy to the small and
weak industries to amplify the production amount. On the other hand, the government decides to
impose tax on the export goods to boost the growth of the exporters (Tan 2014). This means that

11PORTER’S DIAMOND MODEL OF NATIONAL COMPETITIVENESS
exporters are encourages to produce import substitute goods. This will reduce the domestic
demand for the foreign goods. On the other hand, the people will demand for m0re domestic
goods as suppliers offer less market price for the products. As per the economic theory, the
demand gets intensified in response to the reduction in the production price. On this account, the
manufactures will able to reduce the production cost as a result of subsidy. Nonetheless, the
government develops import substitution policy to improve the revenue of the domestic
producers. This provides ample opportunity to earn impressive revenue (Jinachai, Anantachoti
and Winit-Watjana 2016). Every country establishes different production laws as per the
requirement. Hence, the companies should comply the governmental rules and regulations
according to the country-specific rules. The government of Singapore is focused on developing
the environmental-friendly commodities. In this regard, the economy is concerned about
introducing green technology which will emit less carbon in the environment.
As the economy is technology driven, the advancement of technology is the great concern
for the manufacture. The economy should deploy economic resources to the improvement of the
technology companies. For example, Singtel is the evolving multinational telecommunication
company in Singapore. The company operates across Asia, Africa and Australia. The company is
recognised as the biggest investment arm for the government of Singapore. Its diversified
business segments are comprised of large as well as small and medium enterprises. The
government issues affordable business loan for the small and medium sector enterprises (Tan,
Lean and Khan 2014). The study notices that constant support from the local and national
government has helped the company to flourish its telecommunication business across the
countries. The company is advised to adopt Software-as-a-Service (SaaS) to acquire the
significant market share of online business. The collaboration with the government has resulted