Porter’s Competitive Advantage of Industries

Introduction

Porter's diamond model is a diamond structured system that concentrates on evaluating and explaining the underlying factors giving certain regions a competitive edge over other regions. Also, Porter's model investigates the key aspects influencing consistent innovative actions. Porter’s argument is centered on the fact that an organization’s capability to compete on a worldwide level relies primarily on an interconnected set of location strategies which in turn drives industrial growth in various places (Bakan, & Doğan, 2012). An organization’s strategy, internal arrangement and competitiveness, dynamic situations, demand settings, and correlated and supporting industries are some of the conditions which if favorable force organizations to persistently innovate and improve their market value. The competitiveness which results from continuous innovation and upgrade is necessary and key in giving organizations a competitive edge over its rivals (Greve, 2009). There are two aspects defined in Porter’s Diamond model- governance and opportunity. These two aspects fuse to influence the national surrounding on which companies compete for marketing space.

Theories before Porter

            Most of the scholars who came up with similar competitive advantage models assumed that a competitive advantage can only be gained when an organization advances or obtains a collection of attributes that permit it to outdo its rivals (Kharub, & Sharma, 2017). These authors could not narrow down on certain specifics but came up with managerial reasons as being at the core of gaining a competitive edge over other rivals. For example, the key competitive advantage theories were market-based or resource reliant. Their main competencies relied on resources or management strategies which in the long run would give them a competitive advantage.

The Development of Michael Porter’s Concept on National Competitive Advantage

 Porter's national competitive advantage model permits the examination of competitive zones and none competitive zones (Smit, 2010). As a consequence, the national competitive model can isolate or access competitive advantage resources of a certain industrial sector located in a particular region hence assisting in realizing the competitive status of a nation on a global scale. This model is made up of four national factors- factor situations, demands situations, associated and subsidiary industrial sectors, and the entire firm's approach and competitiveness (Kaplan, & Norton, 2008). According to Porter, these issues intermingle with each other to form situations where creativity and competitiveness take place.

 The development of Porter's model relied on the primary factors impacting competitiveness. The four determinants in the diamond model impact competitiveness heavily (Huggins, & Izushi, 2011). Porter's national competitive advantage concept is a proactive economic idea hence does not only quantify but substantiate its claims. The diamond model claims that nations can generate new competitive advantages for themselves such as a robust manufacturing industry, skilled workforces, and administrative support of the nation's economy. Also, the nationwide background under which organizations run extensively determines the manner in which these firms are fashioned, planned, and handled. Thus these issues impact strategy and mechanisms structures laid down by the administration (Wang, 2014). More so, the domestic rivalry is key in influencing global competitiveness since it exerts pressure on the development of exclusive sustainable advantages and competences. As the domestic competition stiffens, organizations are forced to attain a higher level of innovativeness in order to retain a competitive edge over other companies operating in the same market niche.  Consequently, this will assist the companies as they enter into a global competitive stage.

 In terms of usage, the diamond model helps in the analysis of external competitive surroundings.  The findings from the analysis can then be used to explain the strength of certain business activities. Consequently, this may explain the underlying reasons why some companies are stronger in specific regions than others (Rothaermel, 2008). Within the model, Porter tries to explain the reasons for driving competitive in one region than another. The existence of intercontinental competitive traders in a certain state could be resourceful in assisting organizations making use of those traders or suppliers. This is due to the simple fact that affordable accessibility to inputs.

Theoretical Impact

 Michael porter based his Diamond theory on the expectancy idea and value chain study. Through the expectancy concept, Porter organized the main aspects that affect a worker's motivation to achieve certain tasks (Stonehouse, & Snowdon, 2007). He revealed that various elements drive a worker's efforts to attain a logistic objective including the fact that anticipation that activity would yield desired outcomes and these positive outcomes would match the effort behind them (Boja, 2011). Through the value chain examination the author isolated operative supply chain organization, offering a system that groups the actions which make a company’s item- delivery system as principal or supportive activities and further revealing the collaboration between the two factors.

            In summary, the attaining a competitive edge is the pivotal theme of any organization in strategic managerial evaluations. The collection of informed decisions and activities lead to the creation and execution of approaches meant to attain the goals of a company. The continuous iterative mechanism designed at keeping a firm suitably matched to its surrounding helps in making it competitive and sustainable. Porter argued that previous competitive advantage concepts were based on cost and his concept was relevant as it appealed to other elements of competitive advantage.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

Bakan, İ., & Doğan, İ. F. (2012). Competitiveness of the industries based on the Porter’s diamond model: An empirical study. International Journal of Research and Reviews in Applied Sciences, 11(3), 441-455.

Boja, C. (2011). Clusters models, factors and characteristics. International journal of economic practices and theories, 1(1).

Greve, H. R. (2009). Bigger and safer: The diffusion of competitive advantage. Strategic Management Journal, 30(1), 1-23.

Huggins, R., & Izushi, H. (Eds.). (2011). Competition, competitive advantage, and clusters: the ideas of Michael Porter. Oxford University Press.

Kaplan, R. S., & Norton, D. P. (2008). The execution premium: Linking strategy to operations for competitive advantage. Harvard Business Press.

Kharub, M., & Sharma, R. (2017). Comparative analyses of competitive advantage using Porter diamond model (the case of MSMEs in Himachal Pradesh). Competitiveness Review: An International Business Journal.

Rothaermel, F. T. (2008). Competitive advantage in technology intensive industries. In Technological innovation: Generating economic results. Emerald Group Publishing Limited.

Smit, A. J. (2010). The competitive advantage of nations: is Porter’s Diamond Framework a new theory that explains the international competitiveness of countries?. Southern African Business Review, 14(1).

Stonehouse, G., & Snowdon, B. (2007). Competitive advantage revisited: Michael Porter on strategy and competitiveness. Journal of Management Inquiry, 16(3), 256-273.

Wang, H. L. (2014). Theories for competitive advantage.