Porters Diamond
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People looking out for International Trade theories, This Porters Diamond will be a useful presentation for you!... If requested on mail i will send you any particular Topic in International ...

People looking out for International Trade theories, This Porters Diamond will be a useful presentation for you!... If requested on mail i will send you any particular Topic in International Business.
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  • 1.  
  • 2.  
  • 3.
    • To explain on the basis on “Porter’s Diamond”, why some nations succeed and others fail in International Competition!
    • A case of the Korean Economy based on Porters Diamond…
  • 4.
    • INTRODUCTION – Qno.# 1
    • PORTER’S DIAMOND MODEL
    • PORTER’S DIAMOND EXPLANATION
          • DEMAND CONDITIONS
          • FACTOR ENDOWMENTS
          • SUPPORT INDUSTRIES
          • FIRM STRATEGY,RIVELRY
          • GOVERNMENT
          • CHANCE
    • PORTER’s PREDICTIONS
    • PORTER’s CRITICISM
    • Qno.# 2 CASE – Information and Telecommunication - Korea's Competitive Advantages
  • 5.
    • Acc to Heckscher-Ohlin theory and Comparative Advantage theory
    • E.g. A nation uses its resources very productively… BUT HOW ?
    • Above theories give only Partial Explanation to the Question.
    • Porter’s Diamond Model is used to solve this puzzle
    • Developed in 1990, by Michael Porter of the Harvard Business School.
    • Porter theorizes 4 Broad attributes – Factor Endowment, Demand
    • conditions, Related/Support industry, Firm Strategy and rivalry.
    • Additional Variables that influence are Government and Chance
    Source: http://www.quickmba.com/strategy/global/diamond/ Source : Charles W. L. Hill & Arun K. Jain, International Business, Fifth Edition, 2006, TATA McGraw-Hill
  • 6. Why do some fail? The diamond is mutually reinforcing GOVERNMENT CHANCE COMBINED IMPACT COMBINED IMPACT
  • 7.
    • Home country Demand plays an important role
    • Enables better understand the needs and desires of the customers
    • It shapes the attributes of domestic ally made products and creates pressure for innovation and quality
    • E.g. 1
    • Italian ceramic Industry after the world war II
    • There was a postwar housing BOOM !!
    • Consumers wanted cool floors because of Hot climatic conditions
    Source : Charles W. L. Hill & Arun K. Jain, International Business, Fifth Edition, 2006, TATA McGraw-Hill Source: John D. Daniels & LeeH. Radebaugh, International Business, Ninth Edition, 2003, Pearson Education
  • 8.
    • E.g. 2
    • Japan’s knowledgeable buyers of cameras made that industry to innovate and grow tremendously
    • E.g. 3
    • Local demand for cellular phones in scandinavia made nokia and ericson to invest in that in other developing nations.
    • E.g. 4
    • The French wine industry. The French are sophisticated wine consumers. These consumers force and help French wineries to produce high quality wines.
    Source: http://www.quickmba.com/strategy/global/diamond/
  • 9.
    • BASIC FACTORS – Natural resources, climate, location and demographics
    • ADVANCE FACTORS – Communication Infrastructure, skilled labour, Research facilities and so on.
    • Basic factors can provide only an initial advantage
    • They must be supported by advanced factors to maintain success
    • E.g.
    • Choice of tile to meet customer Demand
    • Choice of italy as production location
    • Wood is less available and expensive than tiles
    • Most of the Advanced factors were available within Italy
    Source: John D. Daniels & LeeH. Radebaugh, International Business, Ninth Edition, 2003, Pearson Education
  • 10.
    • E.g. 2
    • Japan a country which lacks arable land and mineral deposits.
    • Large pool of engineers - very vital for a manufacturing industry.
    • Japan has high priced land and so its factory space is at a premium.
    Source: http://www.quickmba.com/strategy/global/diamond/ Source : Charles W. L. Hill & Arun K. Jain, International Business, Fifth Edition, 2006, TATA McGraw-Hill
  • 11.
    • Benefits of investment in advanced factors by Suppliers and related industries can spill over
    • Creates clusters of supporting industries, thereby achieving a strong competitive position internationally.
    • E.g.
    • The enamel production unit was available.
    • The glazes production was also favourable.
    • These two were the main composition of producing tiles.
    • This reduces the Transportation cost.
    Source: http://www.quickmba.com/strategy/global/diamond/ Source : Charles W. L. Hill & Arun K. Jain, International Business, Fifth Edition, 2006, TATA McGraw-Hill
  • 12.
    • E.g. 2
    • Switzerlands success in pharmaceutical industry is closely related to its international success in technical dye industry.
    • E.g. 3
    • Swedish strength in fabricated steel industry is the reason for development in the Sweden's specialty steel industry
    Source: http://online.sfsu.edu/~yywong/Porter1990HBR.pdf
  • 13.
    • Long term corporate vision (Strategy) is a determinant of success
    • Ability of the companies to develop and sustain a competitive advantage requires the 4 th attribute.
    • Presence of domestic rivalry improves a company’s competitiveness
    • E.g.
    • Low entry barriers to market in the tile industry
    • Rivalry became very intense
    • Breakthroughs in both product and process technologies
    Source: John D. Daniels & LeeH. Radebaugh, International Business, Ninth Edition, 2003, Pearson Education
  • 14.
    • E.g. 2
    • Germany tends to have hierarchical management structures composed of managers with strong technical backgrounds and
    • Italy has smaller, family-run firms.
    • E.g. 3
    • Japan has high priced land and so its factory space is at a premium
    • This lead to just-in-time inventory techniques
    • (Japanese firms can’t have a lot of stock taking up space, so to cope with the potential of not have goods around when they need it
    • They innovated traditional inventory techniques).
    Source: http://online.sfsu.edu/~yywong/Porter1990HBR.pdf Source: John D. Daniels & LeeH. Radebaugh, International Business, Ninth Edition, 2003, Pearson Education
  • 15.
    • Chance Events such as major innovations, can reshape industry structure
    • Government – Policies – Can detract from or improve national advantage
    • Regulation can alter home demand conditions
    • Government investment in education can change factor endowment.
    • E.g.
    • 1991 – US Govt – Tariff on Japanese imports of LCD screens
    • APPLE and IBM – Protested strongly
      • Japan – The low cost LCD manufacturer
      • Increase the LCD screens as well as Laptops in the global market – Reduce the Market Share.
    Source: www.nsf.gov/sbe/srs/s4495/conten3d.htm
  • 16.
    • Countries should be exporting products from those industries where all four components of the diamond are favorable.
    • while importing in those areas where the components are not favorable.
    Source: John D. Daniels & LeeH. Radebaugh, International Business, Ninth Edition, 2003, Pearson Education
  • 17.
    • Government can influence on any four components of the diamond.
    • Porter developed this paper based on case studies and these tend to only apply to developed economies.
    Source: John D. Daniels & LeeH. Radebaugh, International Business, Ninth Edition, 2003, Pearson Education
  • 18.
    • Analysis of Korea’s Competitive Advantage with Michael E. Porter's Diamond Framework
    • Korea - New developed countries - Information and Telecommunication .
    Information and Telecommunication Korea's Competitive Advantages (2002)
  • 19.
    • High computing and Internet penetration rate since 1998 .
    • Large user base of Internet - sophisticated internet usage
    • IT effectively used - individual level, Business & government sectors
    • The competitive market situation in online shopping malls and rapid,
    • expansive development in wireless internet service
    • Forcing market players - higher quality service at cheaper to users.
    • Hence Strategic use of IT is demanded due to the intensified market
    • environment
    Source: www.weforum.org/site/homepublic.nsf/Content/Global+Information+Technology+Report+2001-2002
  • 20.
    • Korean government’s effort to develop IT industry -
    • Privatization and Market Deregulation in Telecommunication market
    • Encouraged fair market competition in Telecommunication market
    • Resulting in lower price ,better quality, better service and
    • created favorable business environments for business.
    • E-commerce exceeded 45 billion USD and
    • Projected a growth rate of 9% per year.)
    Source: www.weforum.org/site/homepublic.nsf/Content/Global+Information+Technology+Report+2001-2002
  • 21.
    • Korean Government- continuous effort - Korean IT policies
    • - Improvement in IT infrastructure,
    • - Facilitating the usage of information technology,
    • - Favorable environment for development of IT industry
    • Over 90% of nation area is wired with broadband internet network
    • IT workforce in Korea accounted for 447,000 ( 2.1% of total workforce ).
    • Overall level of education in Korea is relatively high
    • Korean government support educational institutions related to IT skills
    • Supply of quality of IT workforce is expected to increased.
    Source: http://www.ips.or.kr/ncr/index.asp Source: www.outsourcing-service-india.com
  • 22.
    • DaeDeok Valley- an important IT cluster - Attracts foreign
    • investment
    • Several joint research and development projects with well-known
    • foreign companies and universities.
    • The geographical location of Korea - Close to Central China can be
    • regarded another factor for IT advantages.
    • Through export of CDMA technology - solid network among the
    • south Asian nations is established.
    • These factors will enhance the national IT competitiveness for sure.
    Conti.. Source: http://www.ips.or.kr/ncr/index.asp Source: www.outsourcing-service-india.com
  • 23.
    • Korea has secured leading position in semiconductor market
    • especially for DRAM (Dynamic Random Access Memory) - DDR RAM
    • and SD RAM
    • Korea is United States most significant trading partner
    • Cheap and Quality Hardware production units available.
    • IT Enabled Services like BPOs and KPOs – Yantram Solutions
    • Korea ranks itself in top manufacture in LCD and Mobile phone,
    • example – LG group, Samsung group, Doosan Group, DiaBell .
    • Korea - the leading position in IT related production
    Source: http://www.bsau.org/ Source: http://corsairmemory.com/products/twinx10255.htm
  • 24.
    • Korea - the leading position in all IT related production
    • The proactive effort - R&D and market expansion , as well as
    • government support are expected.
    • Korean government plans to extend its financial support for R&D
    • especially in 10 core technologies
    • Initiated several huge project with private sectors
    Source: http://www.bsau.org/ Source: http://corsairmemory.com/products/twinx10255.htm
  • 25.
    • Korea - favorable business environments - for venture firm through
    • - Quick registration process,
    • - Lower entry barriers in IT industry,
    • - Lower cost using telecommunication infrastructure,
    • - Diverse capital resources
    • - Government supports
    • These activities result in huge number of small, medium-sized
    • venture company in IT industry
    • And Hence it leads to severe domestic rivalry because of market
    • competition.
    • Encourages the continuous development of Innovative technology
    • and improvement of business models in business sectors.
    Source: www.technology.gov/reports/korea/korea.pdf
  • 26.  
  • 27.
    • "Competitive Advantage of Nations" Michael E.
    • Porter,  March~April, 1990 HBR Download available at
    • http://online.sfsu.edu/~yywong/Porter1990HBR.pdf
    •   (2) "Global Information Technology Report 2001~2002" from World
    • Economic Forum at 
    •     www.weforum.org/site/homepublic.nsf/Content/Global+Informat
    • ion+Technology+Report+2001-2002
    •   (3) "Asia's New Tech Competitors" at www.nsf.gov/sbe/srs/s4495/conten3d.htm
    •   (4) "National Competitiveness Analysis " from the Institute of
    • Industrial Policy Studies - http://www.ips.or.kr/ncr/index.asp
    • (5) www.outsourcing-service-india.com
    • (6) http://www.bsau.org/
    • (7) http://corsairmemory.com/products/twinx10255.htm
    • (8) www.technology.gov/reports/korea/korea.pdf
    • (9) http://www.quickmba.com/strategy/global/diamond/
  • 28. (1) Charles W. L. Hill & Arun K. Jain, International Business, Fifth Edition, 2006, TATA McGraw-Hill (2) John D. Daniels & LeeH. Radebaugh, International Business, Ninth Edition, 2003, Pearson Education
  • 29.  
  • 30.