Major Determinants of Competitive Advantage

This article discusses the major determinants of competitive advantage and the limitations of Porter's Diamond Theory. It explores the role of strategy, structure, rivalry, supporting sectors, demand conditions, and factor conditions in achieving competitive advantage. The article also highlights the role of government and the impact of cultural diversity on international competitiveness. References are provided for further reading.

Running head: STRATEGIC MANAGEMENT
STRATEGIC MANAGEMENT
Name of the Student
Name of the University
Author Note

1STRATEGIC MANAGEMENT
Major Determinants of Competitive Advantage
Competitive advantage can be termed as the conditions which aids an organization to
manufacture a product or design a service of equal value at a cheaper price. According to the
Diamond Theory of National Advantage by Michael Porter, the four interrelated determinants
that Porter theorized as the deciding factor of national competitive advantage are strategy,
structure and rivalry of the company, related supporting sectors or industries and demand
conditions in the market place of the country and factor conditions. It also states the role
played by the government as a catalyst in the country where the company carries out their
business operations. This helps to improve the position of the position of that country in
global competitive economic environment. It can be termed as a proactive financial theory,
which can be used by the organizations to guide as well as shape the strategy regarding the
approach of operating and investing in various national markets where the company is
running their business operations. Recently, Indian government allowed Foreign Direct
Investment (FDI) in single brand retailing and multi brand retail. This will create market
opportunities to big foreign retail organizations. India can play a major role to allow those
foreign big companies to sustain in the marketplace of India., who can achieve international
success in the retail sector globally. Companies like Amazon has achieved a major place in
the market of India, as well as gained sustainability there (Buckley, Forsans and Munjal
2014).
Limitation of Porter’s Model
On the basis of international competitiveness, there are some limitations on the
Diamond Theory of Porter. The unstable conditions of government or the changes in the
government can hamper the growth and sustainability of the companies. Sudden changes in
the government or their policies may also cause a negative impact on the national as well as

2STRATEGIC MANAGEMENT
international company who are running their business operations in India. Role of
government is vital in encouraging the improvement of the organizations and the industries
both at home and abroad. Rules and regulations within the international boundary if a country
may also have an adverse effect in the business operations of the organization, as the theory
is very much focused on the government conditions of that country. As it can be stated that
the culture in India is rich in diversity, so it can also cause a negativity in the business of that
organization. They need to follow the local demand conditions by respecting the people and
their culture, which is also an important determinant in the Porter’s theory (Morschett,
Schramm-Klein and Zentes 2015).

3STRATEGIC MANAGEMENT
References
Buckley, P.J., Forsans, N. and Munjal, S., 2014. Host-home country linkages and host-home
country specific advantages as determinants of foreign acquisitions by Indian firms. In The
Multinational Enterprise and the Emergence of the Global Factory (pp. 173-199). Palgrave
Macmillan, London.
Riasi, A., 2015. Competitive advantages of shadow banking industry: An analysis using
Porter diamond model. Business Management and Strategy, 6(2), pp.15-27.
Herciu, M., 2013. Measuring international competitiveness of Romania by using porter's
diamond and revealed comparative advantage. Procedia Economics and Finance, 6, pp.273-
279.
Morschett, D., Schramm-Klein, H. and Zentes, J., 2015. Competitive Advantage of Nations
and Regional Clusters. In Strategic International Management (pp. 171-197). Springer
Gabler, Wiesbaden.