The Diamond Model of National Advantage for India

This article discusses the Diamond Model of National Advantage and its application to India's competitive advantage in the global market. It explores the four factors of the model - Demand Conditions, Factor Conditions, Related and Supporting Industries, and Structure, Strategy and Rivalry - and how they contribute to India's success in various industries. The article also provides examples of different market entry options and discusses General Electric's new strategy for diversification and expansion.

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Topic 1:
The Diamond Model of National Advantage for India
Michael Porter proposed the ‘theory of National Advantage’ to state that the factors
affecting the growth of an organisation in the home country as well as globally. It is also known
as ‘Diamond Model’ because its framework is shaped in the form of a diamond structure
(Harding, 2017). It explains the reason why some organisations can compete internationally
while some are not. The diamond model includes the four vital factors affecting the success of
any organisations in a particular industry worldwide (Kharub & Sharma, 2016). They are
Demand Conditions, Factor Conditions, Related and Supporting Industries, and Structure,
strategy and Rivalry. The framework below explains the competitive national advantage of India
over other countries.
1. Demand Conditions: The increasing demand of the customers puts pressure on the
nation to compete in the market by constant innovation and quality improvement. There
must be a local demand created by a particular industry before exporting the products to a
foreign country (Gonzalez, Meliciani & Savona, 2015). This will help in analysing the
demand of the product based on its size, growth pattern and number of buyers. India’s
position is sixth among the most significant world economy in 2018 and is likely to
surpass the UK in 2019. The increased number of multinationals have been set to attract
the development of the country. The GDP has risen from 6.68 per cent in 2017 to 7 per
cent in 2018 (Tradingeconomics.com, 2019). The increase in literacy rate increases the
income as well as the living standards of the people. This will lead to a rise in demand
and consumption, resulting in increasing innovation for better quality products.

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2. Factor Conditions: The factor conditions are basically, the raw materials such as land,
labour, capital and infrastructure required for the production in the retail business. In
India, more than 50 per cent of the population comprises of youth. Some of the IT
Industries of India are globalised including TCS, Wipro, Infosys and HCL. Within 25
years, India's IT industry became giant leaders and generated a large export business. The
cost of providing IT services by these companies are relatively two-three cheaper than in
the US markets. It also creates job opportunities for millions of people worldwide.
3. Related Supporting Industries: This dimension explains the need for supporting
industries whose presence is necessary to prosper and compete globally. The retail sector
in India is associated with the analytics industry. The analytics industry gets a
competitive advantage over the retail industry in the global markets (Li & Zhang, 2018).
The retail sectors can use the analytics strategically to increase the stock according to the
demand. The availability of IT services provides excellent support to most of the
industries in India. The USP of IT sectors is the cost competitiveness, which helps in
positioning these sectors and competing in the global market. IT availability as a
supporting industry helps in boosting the competitiveness of the analytics industry at a
cheaper rate.
4. Structure, Strategy and Rivalry: This dimension helps in describing the
competitiveness of the firm, its management practices and organisational models play an
essential role in making strategy innovation to remain in the market (Sultan & Qaimary,
2017). The core competency of leading IT industries in India has attracted many
investors. Indian IT services are delivered both offshore and on-shore by the major IT
firms, TCS, Wipro, Infosys and Tech Mahindra. According to Accenture’s Platform

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Readiness index, India’s position is fifth in digitalisation maturity and expected to be
among the top by 2020 (Static-news.moneycontrol.com, 2018).
Topic 2:
An example of each of the Market Entry Options
1. Exporting: Coopers Brewery is the largest Australian based beer company. It is not
having any manufacturing unit outside Australia. It exports its products to another
country.
2. Franchising: Coca-Cola grants the franchise of manufacturing and selling the
product using its trademark and name. It sells the supplies to local entrepreneurs and
regional manufacturing franchise.
3. Licensing: Coca-Cola even licenses their secret formula of manufacturing their
product to the foreign company and exchange money in return.
4. Wholly Owned Subsidiary: Audi, Bugatti, Lamborghini, Bentley and Volkswagen
is a wholly owned subsidiary of Volkswagen American group.
5. Joint venture: Strategic alliance of Kellogg Company with Wilmar International
Limited helped in selling and proper distribution of cereal products to Chinese
consumers.
Topic 3:
G.E.’s New Strategy: Less Is More By Steve Lohr (The New York Times)
The above article explains the new diversified expansion strategy of General Electric
Company. It is an American multinational conglomerate, headquartered in Boston. The Chief
Executive officer of the company is John Flannery (Ge.com, 2019). The company ranks 18th in

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terms of largest firm among the Fortune 500 in 2018 (Fortune, 2018). In this article, the author
talks about the new corporate decisions that are to be implemented by the new leader of the G.E.
The new CEO has promised several strategic planning that requires attention immediately and
will improve the efficiency of the company. He had announced the restructuring of the firm’s
decision. The company has announced the retrenchment will be achieved by selling off its
business of 20 billion USD in the next two years. The oil gas business and the power generation
business are responsible for decreasing the profit of the company. Later on, in July, G.E. merged
with another entity, Baker Hughes to form a separate company. G.E. holds a majority of stake in
this company that is 62.5 per cent. An increase in the revenue of 14 per cent was noticed in the
third quarter in the financial report of the company. In the fourth quarter, the company reported a
9 per cent decline in its operating profits mainly due to its cost-cutting programs, electricity and
gas turbines business. The decrease in these businesses put a dent on the cash flow of the G.E.
reducing the total operating profits from an estimated USD 3 billion to an actual USD 7 billion .
The motto was to maintain and increase the benefit of the business, but the result was the
opposite.
The major challenge found here could be the development of oil and gas business, both
offshore and onshore to facilitate the production process. When the energy markets turned, the
company implemented its current strategy for ensuring value creation all throughout the
business. The lack of profit in business made General Electric to manage operating earnings of
$1.05 to $1.10 per share, though the company misjudged the market segments and due to this,
the renewable sources of energy have restricted the demands and expectations for new gas and
oil services largely (Thompson, Strickland & Gamble, 2015). The cash flow has also been
affected, which has made the business organization focus on the extension of degree of

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penetration into the markets and improve the business operations too required to manage the
renewable sources of energy in the energy market. The digitization strategies have also helped in
diversifying the markets and ensured meeting the demands in marketplace with much ease and
efficiency.
The diversified expansion strategy further helped in extending the scopes and
opportunities, furthermore enable proper distribution of products and service along with ensuring
that the customers can easily differentiate between those and other products available in the
marketplace. Through the diversification strategy, the company would be able to enter new
markets as well as manage the production of resources to ensure delivering the products and
services and meet the demands and expectations in the marketplace with ease and efficiency
(Thompson, Strickland & Gamble, 2015). The vertical integration could also be an effective
diversification strategy for General Electric to control the supply chain activities and ensured
acqusitions of raw materials and resources along with improving the production process and
delivering the products and services to the customers easily. Thus, it denotes that rather than
bringing up new products and expanding the production process, it is more important to work
with what the organization currently possess and focus more on the diversification procedures to
enter new markets and ensure that the supply meet the demands in the market (Lien & Li, 2013).

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References:
Fortune. (2018). General Electric. Retrieved from http://fortune.com/fortune500/general-
electric/
Gonzalez, J. L., Meliciani, V., & Savona, M. (2015). When Linder meets Hirschman:
inter-industry linkages and global value chains in business services (No. 2015-
20). SPRU-Science and Technology Policy Research, University of Sussex.
Harding, S. (2017). MBA management models. Routledge.
Kharub, M., & Sharma, R. K. (2016). INVESTIGATING THE ROLE OF PORTER
DIAMOND DETERMINANTS FOR COMPETITIVENESS IN MSMEs.
International Journal for Quality Research, 10(3).
Li, M., & Zhang, Y. (2018). Comparison of the Influencing Factors of International
Competitiveness between China and India Manufacturing Industries. In 2018 2nd
International Conference on Education Science and Economic Management
(ICESEM 2018). Atlantis Press.
Lien, Y. C., & Li, S. (2013). Does diversification add firm value in emerging economies?
Effect of corporate governance. Journal of Business Research, 66(12), 2425-2430.
Static-news.moneycontrol.com. (2018). Smartlink Network Systems LTD. Retrieved
from http://static-news.moneycontrol.com/static-mcnews/2018/05/Smartlink-
Network-Systems-09052018.pdf
Sultan, S., & Qaimary, D. (2017). Role of Universities in Enhancing the Competitiveness
of Palestinian Agribusiness: Applying Porter’s Diamond Model.
Thompson, A., Strickland, A. J., & Gamble, J. (2015). Crafting and executing strategy:
Concepts and readings. McGraw-Hill Education.

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Tradingeconomics.com. (2019). India GDP Annual Growth Rate | 2019 | Data | Chart |
Calendar | Forecast. Retrieved from https://tradingeconomics.com/india/gdp-
growth-annual