In order to better demonstrate what factors contribute to a country’s national advantage, Michael E Porter created a diagram known as the Porter Diamond. First published in Porter’s own book The Competitive Advantage of Nations, he used the shape of a diamond to illustrate his concepts. The book itself offers academic insights, as is credited by CIMA, into how the diamond analogy functions and how it can be used in formulating corporate strategy.
The set of factors, both created and inherited, which give one independent state an economic edge over another is referred to as its national advantage. ACCA claims that by implementing the Porter Diamond into a nationwide corporate strategy, one can expect to drastically improve revenue and innovation.
Porter’s Diamond diagram is made up of four points which are as follows: firm strategy, demand conditions, factory conditions, and related and supporting industries. These factors are each symbiotic in its relationship to the other three, resulting in a mutually supported structure that is symbolized by a diamond.
Government oversight, natural resources and skilled labor are just a few of the factor conditions that comprise a company’s total set of geographical advantages and disadvantages. As described by ACCA online, in order to compete with companies that have a resource advantage within their own country, some companies have to creatively manage their employees and materials to stay afloat.
Consider an oil company in the Middle East. By being able to perform all of its operations such as drilling and refining while also being able to sell to the local market, it stands an enormous advantage over similar companies with limited access to oil. In order to stay competitive, those similar companies may look to other alternative fuels to better accommodate the types of resources that are immediately available.
The related and supporting industries described by the Porter Diamond encompass all companies related to the primary business. Depending on their use of their competitive advantages, they can have a positive or negative effect on the primary corporation. CIMA online assures that a country’s national advantage can be increased by having strong supporting industries.