Diamond Model Theory

Diamond Model Theory

The diamond model created by Michael Porter for the competitive advantage of nations offers a model that can help comprehend the combative position of a country in global opposition and the application of the model also extends to be used for other geographic regions (Value Based Management, 2011).

According to Recklies (2001), the Porter’s Diamond Model determines factors of national advantage, and it indicates that the national home base of a corporation plays a significant role in defining the extent to which it is likely to obtain an advantage on a worldwide scope and this home base provides basic facts, which strenghten or prevent organizations from building advantages in global competition. “Porter's focal point on competitiveness is a diversion from conventional economic thinking” has been reported by Stone and Ranchhod (2006).

The four distinguish factors according to Porter are:

1) Factor Condition

2) Firm strategy, structure and rivalry

3) Demand conditions

4) Related and supporting industries

According to Quick MBA (2011), each of the individual points of the diamond as a whole effect four ingredients that lead to a national comparative advantage, and these ingredients have been listed as: 1) the availability of resources and skills, 2) information that firms use to decide which opportunity to pursue with those resources and skills, 3) the goals of individuals in companies and 4) the pressure on companies to innovate and invest.

According to Smit (2010), Porter also suggested two other factors in counting to the above mention four, and they are government policy and change that authentication and add to the system of national competitiveness but do not create lasting combative advantages.