How convincing is Porters model of national competitive advantage in Essay - 8

How convincing is Porters model of national competitive advantage in explaining the characteristics and performance of the business systems of major economies - Essay Example However, irrespective of the individual firms, some countries as a whole have achieved a higher competitive position as compared to other firms (Baker, 2007). This paper will shed some light on how the nations achieve competitive advantage by using Porter’s Diamond Model. This model focuses on the determining factors of national competitive advantage. The paper will discuss the issues and loopholes of the Porter’s Diamond Model and how they fail to answer certain circumstantial problems. Porter (1990) explained the competitiveness of a nation based on the four different parameters, which includes; factor conditions, demand conditions, supporting industries and firms’ strategy, structure and rivalry. Factor Conditions: The factor conditions include the production factors of a nation, like human resources and human capital, physical resources, knowledge base, financial strength. The quantity and quality of the available human resources determine the national production capabilities. Demand Conditions: The demand conditions explain the level of demands of products in the home country. The higher level of demand influences the pace of product innovation and improves service quality. Firms’ Strategy structure Rivalry: This parameter suggests how the firms in a country are organized and how they determine the domestic competitiveness. It mostly reflects the organizational cultural trends of the nation. Certain organizational behaviour and pattern of activities provide added advantage to them in terms of other foreign companies. Relating and supporting industries: The presence of other industries influences the competitive position of an organization. The domestic firms can leverage the presence of other industries in order to create competitive advantage. The four parameters of the Diamond model are mostly industry oriented. The diamond model is focused on achieving a competitive advantage in a particular industry.