Critically Discussing Porter's Diamond Model for Business Strategy

This essay critically examines the usefulness of Porter's Diamond Model in explaining the home and host location strategies of international businesses. It emphasizes the significance of international business strategy in guiding commercial transactions across different countries, aiming to enhance sales and profitability. The essay explores how businesses like Tesco and Marriott can use Porter's Diamond Model to analyze their operations in both home and host countries. It delves into the six key factors of the model: factor conditions, demand conditions, related and supporting industries, firm strategy, structure, and rivalry, government, and chance. The analysis highlights the importance of skilled workforce, innovative technology, and government support for success in international markets. The essay also discusses how the model helps businesses identify market conditions, understand consumer preferences, and gain competitive advantages. By analyzing these factors, firms can make informed decisions about international expansion and adapt to competitive landscapes, ultimately improving their performance in the global marketplace.

International
Business Strategy

“Critically discuss to what extent Porter’s Diamond Model is a useful concept in explaining
home and host location strategies of international business? Illustrate your answer with
reference to at least two case companies.”
Main purpose of current study is that it is essential for the individual to assess
international business tactic that refers to plan and guide commercial transactions which takes
place among businesses that are operating in different countries (Omar and Sawy, 2013).
However, these are such plans and actions that refer to businesses operating at global level. Here,
the main goal of business is to enhance the sales and profitability in market (Andreas and et. al.,
2011). Most of the businesses are operating their firm in domestic and host countries to expand
its market share and client base. Therefore, in order to achieve success within firm, it is essential
for the management to undertake effectual business strategy so that organization can also operate
its business in the international market (Kim and Mauborgne, 2013). Furthermore, it can be
assessed that through implementing Porter’s Diamond model, firm can effectively analyze the
operations of firm in home and host countries of international business. In the current study,
implications of porter’s diamond model within Tesco which is a retail firm and Marriott which is
a hospitality industry can be understood effectively (Angelo, 2009). Thus, through application of
such international business strategy, firm is able to analyze its market conditions by operating the
business in both home and host locations (Langenberg, 2007).
According to the view of Axson (2010), it can be stated that by adopting Porter’s
Diamond analysis, it forms a cluster that involves a number of small firms in which
competitiveness of one organization is interrelated with the performance of other companies.
Thus, such model is used in order to analyze the implications within host and home location
strategies of international business (Jansson, 2008). For instance, if Tesco and Marriott are
planning to operate its business in other countries instead of its home country then they need to
undertake international business strategy (Axson, 2010). With the help of this, firm is required to
identify the market conditions and prevailing competitiveness in the country. As argued by
Baines, Fill and Page, 2013), such model is implemented for better international trade practices
of the firm and also proposed competitive advantage for business that resides in the factor in
order to attain the desired results (Rossi, 2010). Further, in order to start the business
successfully in both local as well international locations, firm is required to have skilled
workforce, innovative technology, good government support and high knowledge base (Rowley,
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2002). Therefore, implying Porter diamond theory within firm represents that the international
playing of business and establishing the business worldwide (Baines, Fill and Page, 2013).
Following are the six factors that are incorporated into Porter’s Diamond model so that
competitiveness analysis can be done. It is as follows-
 Factor conditions- As per the views of Baum, Hackstein and Mehling, (2012), it
involves varied human resources, physical resources, knowledge and infrastructure etc.
However, all these resources are useful in order to undertake the business to a specific
level and also to attain competitiveness of the firm in market (Ireland and Hoskisson,
2008). For instance, it can be assessed that wherever businesses such as Tesco and
Marriott are planning to operate their business either in home or host locations (Baum,
Hackstein and Mehling, 2012). The particular country is able to create its own important
factors such as skilled resources and technological base (Schwarz, 2011). However,
Bernanke (2010), argued that there are also certain disadvantages of such factor. These
are like sometimes, there is shortage of labor or scarcity of raw material forces firms to
develop new methods and thus, it helps in gaining competitive advantage in the market
(Bernanke, 2010).
 Demand conditions- It can be assessed that those businesses which are planning to
operate in home market can assist the firm to create competitive advantage at the time
when purchasers of home market pressurizes firm to bring innovation and develop the
product faster as compared with competitors (Blombäck and Wigren, 2009). For
example, the clients of Marriott are willing to stay in its UK branch more than as
compared to its other branches. Thus, firm is able to develop a competitive advantage in
the marketplace (Hill, Jones and Schilling, 2014).
 Related and supporting industries- As per the Corsetti and et.al., (2010), it can be
stated that there are varied firms that are able to produce inputs that are crucial for
innovation and internationalization (Hansen, 2006). However, both the selected firms i.e.
Tesco and Marriott are required to provide cost-effectual inputs and need to participate in
upgrading process so that innovative products can be developed in the marketplace
(Stonehouse and Houston, 2013). Also, it can be stated that it helps the firm to strengthen
its market in order to make the suppliers strong and to become global competitors
(Corsetti and et.al., 2010).
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 Firm strategy, structure and rivalry- Here, it can be evaluated that the way through
which businesses are created, set goals and also manages the operations in order to attain
success within firm (Haley and Haley, 2006). But the availability of intense rivalry in the
home country is also essential that helps Tesco and Marriott to develop pressure and
innovate with the aim to increasing competitiveness. For instance, it is crucial for
business to develop an effectual strategy so that the best results can be attained at the time
of operating business internationally (Demir and Söderman, 2015). Also, it is essential
for Tesco and Marriott to provide innovative services and products to clients so that they
can provide competition to local rivals (Grunig, Clark and Kuhn, 2010).
 Government- As per the view of Easy (2010), government plays a major role in
influencing each of the above factors of competitiveness. However, government are able
to influence the supply conditions of key production factors to influence the demand
conditions within home market and competition among businesses (Tiffany, Peterson and
Barrow, 2011). It can be assessed that government interventions can occur at local,
regional, national and international level (Grosse, 2000). For instance, it can be identified
that government of that particular country motivates the firm in order to improve their
performance by attracting consumers to purchase the product in marketplace. It also
stimulates local rivalry through limiting direct cooperation and also enforces anti-trust
regulations so that best results can be attained (Easy, 2010).
 Chance- It states that the events that are occurred and it is not within the control of
business, also, they are crucial because they create discontinuities in order to attain some
competitive advantage of firm within marketplace (Tomlinson, Murdick and Moor,
2000). Here, all these factors are interconnected with each other in order to create
conditions where innovation and also helps in improving competitiveness (Eden, 2010).
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Illustration 1: Porter Diamond model
(Source: El Sawy and Pereira, 2012)
According to the view of Fernie, Fernie and Moore (2015), it can be stated that the main
aim of international business is to develop and sustain competitiveness in order to create
economic value within both home and host location (Afonso and Sousa, 2012). However,
through applying Porter Diamond model assists in adopting internationalization so that it assists
firm to effectively operate within specific countries and achieve results (Fernie, Fernie and
Moore, 2015). Such model has been implemented in order to analyze the internationalization and
assess the right location so that success can be attained within firm. However, Fisher (2009),
argued that businesses in order to carry out international business aims to undertake effectual
models for the analysis of external environment so that business can be started at right location.
For instance, Tesco before starting its business in international market, management of firm is
required to analyze the market conditions (Wilson, 2012). Also, firm needs to assess the culture
of the country so that they come to know regarding the taste and preferences of consumers. Thus,
it helps firm to decide regarding the implementation of firm in international market (Fisher,
2009).
Through implementing the Porter Diamond model it argues that nation's competitiveness
depends upon the capacity of its industry in order to innovate and upgrade the business and attain
desired outcomes in the form of sales and profitability (Yeung, 2007). Also, business attains
competitive advantage that depends upon the nation's ability in order to provide a home base to
Tesco and Marriott (Ghezzi, 2013). Thus, it aims firm to enhance their products and services in
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regard to quality, attributes and technology so that they can successfully compete within
international market (Minor and Morgan, 2011). However, through an business perspective it
states that the national competitive advantage depends upon the countries' ability to provide a
home base for firm in order to sustainable enhance firms products and services in regard to
quality, characteristics and technology so that success can be attained effectively (Zeng, 2013). It
is crucial for firm to develop its competitiveness in order to operate within international
marketplace (Freiling and et.al., 2008).
However, as per the Belohlavek (2011), through implementing Porter Diamond model
helps firm to operate within international market and attain desired goals. Also, it is crucial for
Tesco and Marriott to build sustainable competitiveness in international market and attract
consumers worldwide (Teece, 2010). It can also assess that business is required to analyze varied
factor conditions such as raw materials and labor so that business can build competitive
advantage in marketplace (Ferrell and Hartline, 2012). Hence, implementing competitive
advantage within firm helps in building ability so that desired results can be attained.
Furthermore, through implementing Porter's Diamond Model helps in assessing that business is
required to discover new trends and demands so that client’s preferences can be ascertained so
that expectations of consumers can be fulfilled by providing them required product (Belohlavek,
2011). For instance, at the time of applying such model within Tesco and Marriott helps firm to
place its business in domestic and host locations and attracting consumers to purchase the
product with the aim to enhance the sales and profitability of firm in market (Boons, 2009).
Here, business should be able to face the tough competition because they are operating
their business in international market and thus have varied competitors operating within market
(Nickols, 2012). Thus, it is crucial for firm to gain competitive advantage and develop a strong
competition through introducing innovative products and services in market and thus attain
desired results (Faulkner, 2002). However, through developing the business in international
market firm can anticipate the trends and thus provides relevant products and services to
consumers so that they can satisfy their needs (Bergeron, 2004). For instance, Tesco and Marriott
before implementing its business in international market assists firm to analyze the market trends
so that they can effectively provide the required products and ser4vices as per the needs of
consumers and thus attain satisfaction (Trabish, 2014). Also, business should select the skilled
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workforce so that they can be implemented at the new location of firm and thus operate
effectively in international market (Condon, 2002).
It is essential for business to operate both in domestic and international market so that
best outcomes can be attained within firm. Also, government plays a crucial role through
influencing the business to start its operation within the particular country so that employment
opportunities can be generated (Culp, 2002). Thus, Porter Diamond model is very beneficial in
implementing it within firm so that best opportunities can be provided in the form of labor and
technology and thus best results in the form of profit and sales can be attained. It also assists in
carrying out a competitive analysis so that both cost and time can be saved (Eshun, 2009).
Hence, undertaking international business strategy is the best method through which firm can
make right decisions for choosing the location and thus making the business successful.
However, it is essential for firm to effectively analyze both the internal and external business
environment before selecting the location because if firm makes wrong decision in regard of
selection the business location it costs high for firm (Davcev and Gomez, 2010).
At the end of the study it can be articulated that applying international business strategy
within firm helps them to plan and implement action so that best results can be attained in the
form of sales and profitability (Demir and Gocer, 2011). However, applying the Porter Diamond
model helps firm to analyze the competitiveness within business so that best decision can be
made of locating the business both within home and host locations. Therefore, businesses
analyze its competitive advantage and implement its operations within international market so
that sales and profits can be enhanced.
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