Porter’s Diamond Model is one of the most powerful economic theories that allow a business to gain a competitive advantage and improve its performance. Michael Porter introduced his theory in 1990 in his book The Competitive Advantage of Nations. Since then, this model, also known as Porter’s Diamond and Porter’s Diamond framework, has been used by all companies wanting to achieve an international advantage in foreign markets.
🔝 Top-5 Porter’s Diamond Model Examples
- Internet Influence on International Marketing
- External and Internal Analysis Tools in Strategic Management
- Internationalization of Business: Management Report
- Australian Wine Industry
- Developing Operations in the Indian Soft Drink Industry
🔤 What Is Porter’s Diamond Model?
Porter’s Diamond Model explains why some industries within a particular nation can be competitive internationally while others cannot.
According to Porter’s framework, any business can compete in the international market if it considers the following elements: firm strategy, structure, and rivalry; factor conditions; demand conditions; and supporting and related industries. As you can see, the model includes four key ingredients, creating an image of a diamond. A company gains more opportunities to upgrade and compete globally if all these conditions are favorable.
🧩 What Are the Four Elements of the Porter Diamond Framework?
Let us discuss each element of Porter’s Diamond Model in more detail.
Firm Strategy, Structure, Rivalry
The first element of the framework describes the national context in which a company operates. National context heavily influences how businesses are created, managed, and organized. For example, intense domestic rivalry pushes companies to innovate in order to maintain a competitive advantage. Moreover, the domestic competition encourages companies to go beyond their national borders and enter the international arena.
Local demand significantly affects how successful a country’s industries are. Operating in a larger domestic market can set many challenges but also create opportunities for a business to grow. In addition, such conditions can encourage a company to go beyond its borders and compete internationally.
This element in the framework refers to the accessibility of natural, capital, and human resources. The national context in which a business operates extensively influences how companies are created, organized, and managed. For example, while firms in countries like Saudi Arabia have many available natural resources, companies in China are rich in their human resources.
Supporting & Related Industries
One more factor from the framework analyzes the presence of supporting industries. Many market giants depend on alliances and partnerships with other companies. For example, Apple and MasterCard have partnered to develop a contactless payment solution. Collaborations create additional value for customers and help a business become more competitive. Overall, having strongly related and supporting industries is essential for a domestic company to become globally competitive.
Government & Chance
Government and chance are 2 additional elements of Porter’s Diamond theory that proved to have a significant influence on companies’ performance. Even though the government cannot create competitive industries, it can stimulate early demand and enforce domestic rivalry to help companies reach higher levels of competitiveness.
As for the chance, Porter writes that unexpected external events can negatively or positively affect countries, industries, and businesses.
🧑💼 The Use of Porter’s Theory
There are many ways how a business can apply Porter’s Diamond model. For example, this framework allows to:
- Explore direct and indirect market rivalry, for example, competitors’ products and services, their level of customer service, and pricing strategy.
- Analyze current and potential suppliers and find out how unique their product is and whether they cater to the competitors.
- Evaluate customers’ loyalty and the costs of switching from one company to another.
- Recognize the threat of replacement and develop a strategy to remain relevant in the market when industry dynamics change.
- Identify the threat of new entrants in the market, their price strategies, the innovation factor, and other essential details.
📝 Porter’s Diamond Model Example
Here’s how Porter’s Diamond model can be applied to a well-known company, Apple, in the US. Try using it as a template for your own analysis.
Porter’s Diamond model of Apple in the US:
- Firm strategy, structure, and rivalry. Apple was founded in the US, one of the world’s most innovative countries. Its early rivals in the electronic market were IBM, Xerox, and Commodore. Apple soon became a leader due to its hardware expertise and the integrated Apple ecosystem.
- Demand conditions. Apple has significant demand for its innovative gadgets all around the world. If the company continues to execute this strategy, this demand will likely be sustained.
- Factor conditions. Since Apple is based in Silicon Valley, California, it has access to a vast skilled workforce. At the same time, most manufacturing processes take place in China, where labor is cheaper.
- Related and supporting industries. Apple benefits from the increased collaboration between related companies in Silicon Valley. The company also has an effective supply chain.
🎓 Porter’s Diamond Model Research Paper Examples
- International Marketing Plan for SABIC Innovative Market: Entry into the Australian MarketBusiness essay sample: Saudi Basic Industries Corp - one of the world’s leading producers of chemicals and intermediates, industrial polymers, etc. Australia is a possibly gainful new market for SABIC.
- Leveraging Information Technology to Maximize Competitive AdvantageBusiness essay sample: Information System plays an important role in the business strategies. Information systems are the strategic weapon in order to achieve reputable position in market.
- Caribou Coffe Strategic OptionsBusiness essay sample: Caribou, a company owned gourmet coffee house operator in the United States is the second largest in the provision of quality gourmet coffee and espresso-based beverages.
- Strategic Management and the Competitive StrategiesBusiness essay sample: The paper evaluates strategic management and the competitive strategies put forward by Porter, who outlined three plans that a company can use to reach a competitive advantage.
- Porter’s Model on Australian Wine IndustryBusiness essay sample: Diamond National Advantage is a model developed by Michael Porter and is used by countries and companies to gauge international business prospects.
- The National Competitiveness IssueBusiness essay sample: The emerging need for more meaningful concept of competitiveness enforced Michael E. Porter to define it in more genuine way.
- Michael Porter’s Diamond ModelBusiness essay sample: Michael Porter’s Diamond model continues to be a highly relevant and applicable theory used for evaluating the competitive advantage of countries, industries, and businesses.
- The Theory of Business Strategy in UseBusiness essay sample: Michael Porter in his views gives much attention to a competitive market. He puts rivals in the number of key forces, on which a strategy should depend.
- Siemens AG: Global Development StrategyBusiness essay sample: The case of Siemens AG illustrates how a globally developed company and a giant of the telecommunication market, can also encounter developmental issues.
- Salim Group's Company Analysis Since 1990Business essay sample: The political environments of the countries in which Salim and his group are venturing into are quite stable. The countries provide a good business environment.
- The Immense Success of IKEABusiness essay sample: This paper dwells upon the way key success factors of IKEA, global strategy, environmental and other Issues, principles gleaned from "Porter's Diamond".
- Strategic Management Analysis NikeBusiness essay sample: The paper gathered analyses and evaluates relevant information on both the Nike company and the industry it occupies.
- Sunvisionnair: International Business StrategyBusiness essay sample: This is a report to Sunvisionaire's Chief Executive Officer (CEO) containing information about a solar energy plant in India.