porters diamond
DESCRIPTION
People looking out for International Trade theories, This Porters Diamond will be a useful presentation for you!... If requested on mail i will send you any particular Topic in International Business. All the Best!TRANSCRIPT
- 1.
2. 3.
- To explain on the basis on Porters Diamond, why some nations succeed and others fail in International Competition!
- A case of the Korean Economy based on Porters Diamond
4.
- INTRODUCTION Qno.# 1
- PORTERS DIAMOND MODEL
- PORTERS DIAMOND EXPLANATION
-
-
-
- DEMAND CONDITIONS
-
-
-
-
-
- FACTOR ENDOWMENTS
-
-
-
-
-
- SUPPORT INDUSTRIES
-
-
-
-
-
- FIRM STRATEGY,RIVELRY
-
-
-
-
-
- GOVERNMENT
-
-
-
-
-
- CHANCE
-
-
- PORTERs PREDICTIONS
- PORTERs CRITICISM
- Qno.# 2 CASEInformation and Telecommunication-Korea's Competitive Advantages
5.
- Acc toHeckscher-Ohlin theory and Comparative Advantagetheory
- E.g.A nation uses its resources very productivelyBUT HOW ?
- Above theories give onlyPartial Explanation to the Question.
- Porters Diamond Model is used to solve this puzzle
- Developed in 1990, byMichael Porterof the Harvard Business School.
- Porter theorizes 4 Broad attributes Factor Endowment, Demand
- conditions, Related/Support industry, Firm Strategy and rivalry.
- Additional Variables that influence areGovernment and Chance
Source:http://www.quickmba.com/strategy/global/diamond/ Source : Charles W. L. Hill&Arun K. Jain,International Business,Fifth Edition, 2006, TATA McGraw-Hill 6. Why do some fail?The diamond is mutually reinforcing GOVERNMENT CHANCE COMBINEDIMPACT COMBINEDIMPACT 7.
- Home country Demand plays an important role
- Enables better understand the needs and desires of the customers
- It shapes the attributes of domestic ally made products and creates pressure for innovation and quality
- E.g. 1
- Italian ceramic Industry after the world war II
- There was a postwar housing BOOM !!
- Consumers wanted cool floors because of Hot climatic conditions
Source : Charles W. L. Hill&Arun K. Jain,International Business,Fifth Edition, 2006, TATA McGraw-Hill Source:John D. Daniels & LeeH. Radebaugh,International Business,Ninth Edition, 2003, Pearson Education 8.
- E.g. 2
- Japans knowledgeable buyers of cameras made that industry to innovate and grow tremendously
- E.g. 3
- Local demand for cellular phones in scandinavia made nokia and ericson to invest in that in other developing nations.
- E.g. 4
- The French wine industry. The French are sophisticated wine consumers. These consumers force and help French wineries to produce high quality wines.
Source:http://www.quickmba.com/strategy/global/diamond/ 9.
- BASIC FACTORS Natural resources, climate, location and demographics
- ADVANCE FACTORS Communication Infrastructure, skilled labour, Research facilities and so on.
- Basic factors can provideonly an initial advantage
- They must be supported by advanced factors to maintain success
- E.g.
- Choice of tile to meet customer Demand
- Choice of italy as production location
- Wood is less available and expensive than tiles
- Most of the Advanced factors were available within Italy
Source:John D. Daniels & LeeH. Radebaugh,International Business,Ninth Edition, 2003, Pearson Education 10.
- E.g. 2
- Japan a country which lacks arable land and mineral deposits.
- Large pool of engineers - very vital for a manufacturing industry.
- Japan has high priced land and so its factory space is at a premium.
Source:http://www.quickmba.com/strategy/global/diamond/ Source : Charles W. L. Hill&Arun K. Jain,International Business,Fifth Edition, 2006, TATA McGraw-Hill 11.
- Benefits of investment in advanced factors by Suppliers and related industries can spill over
- Creates clusters of supporting industries, therebyachieving a strong competitive position internationally.
- E.g.
- The enamel production unit was available.
- The glazes production was also favourable.
- These two were the main composition of producing tiles.
- This reduces the Transportation cost.
Source:http://www.quickmba.com/strategy/global/diamond/ Source : Charles W. L. Hill&Arun K. Jain,International Business,Fifth Edition, 2006, TATA McGraw-Hill 12.
- E.g. 2
- Switzerlands success in pharmaceutical industry is closely related to its international success in technical dye industry.
- E.g. 3
- Swedish strength in fabricated steel industry is the reason for development in the Sweden's specialty steel industry
Source:http://online.sfsu.edu/~yywong/Porter1990HBR.pdf 13.
- Long term corporate vision (Strategy) is a determinant of success
- Ability ofthe companies to develop and sustain a competitive advantage requires the 4 thattribute.
- Presence of domestic rivalry improves a companys competitiveness
- E.g.
- Low entry barriers to market in the tile industry
- Rivalry became very intense
- Breakthroughs in both product and process technologies
Source:John D. Daniels & LeeH. Radebaugh,International Business,Ninth Edition, 2003, Pearson Education 14.
- E.g. 2
- Germany tends to have hierarchical management structures composed of managers with strong technical backgrounds and
- Italy has smaller, family-run firms.
- E.g. 3
- Japan has high priced land and so its factory space is at a premium
- This lead to just-in-time inventory techniques
- (Japanese firms cant have a lot of stock taking up space, so to cope with the potential of not have goods around when they need it
- They innovated traditional inventory techniques).
Source:http://online.sfsu.edu/~yywong/Porter1990HBR.pdf Source:John D. Daniels & LeeH. Radebaugh,International Business,Ninth Edition, 2003, Pearson Education 15.
- Chance Events such as major innovations, can reshape industry structure
- Government Policies Can detract from or improve national advantage
- Regulation can alter home demand conditions
- Government investment in education can change factor endowment.
- E.g.
- 1991 US Govt Tariff on Japanese imports of LCD screens
- APPLE and IBM Protested strongly
-
- Japan The low cost LCD manufacturer
-
- Increase the LCD screens as well as Laptops in the global market Reduce the Market Share.
Source:www.nsf.gov/sbe/srs/s4495/conten3d.htm 16.
- Countries should be exporting products from those industries where all four components of the diamond are favorable.
- while importing in those areas where the components are not favorable.
Source:John D. Daniels & LeeH. Radebaugh,International Business,Ninth Edition, 2003, Pearson Education 17.
- Government can influence on any four components of the diamond.
- Porter developed this paper based on case studies and these tend to only apply to developed economies.
Source:John D. Daniels & LeeH. Radebaugh,International Business,Ninth Edition, 2003, Pearson Education 18.
- Analysis of Koreas Competitive Advantage withMichael E. Porter's DiamondFramework
- Korea- New developed countries -Information and Telecommunication .
Information and Telecommunication Korea's Competitive Advantages (2002) 19.
- High computing and Internetpenetration rate since 1998 .
- Large userbase of Internet - sophisticated internet usage
- IT effectively used -individual level, Business& government sectors
- The competitive market situation in online shopping malls andrapid,
- expansive development in wireless internet service
- Forcing market players -higher qualityservice atcheaper to users.
- HenceStrategic use of IT is demandeddue to the intensified market
- environment
Source:www.weforum.org/site/homepublic.nsf/Content/Global+Information+Technology+Report+2001-2002 20.
- Koreangovernments effortto develop IT industry -
- Privatization and Market Deregulationin Telecommunication market
- Encouraged fair market competition in Telecommunication market
- Resulting inlower price ,better quality, better serviceand
- created favorable business environments for business.
- E-commerce exceeded45 billion USDand
- Projected agrowth rate of 9%per year.)
Source:www.weforum.org/site/homepublic.nsf/Content/Global+Information+Technology+Report+2001-2002 21.
- Korean Government- continuous effort - Korean IT policies
- - Improvement in IT infrastructure,
- - Facilitating the usage of information technology,
- - Favorable environment for development of IT industry
- Over 90% of nation areais wired with broadband internet network
- IT workforce in Korea accounted for 447,000 ( 2.1% of total workforce ).
- Overalllevel of educationin Korea is relatively high
- Korean government support educational institutions related to IT skills
- Supply ofquality of IT workforceis expected to increased.
Source:http://www.ips.or.kr/ncr/index.asp Source:www.outsourcing-service-india.com 22.
- DaeDeok Valley-an important IT cluster - Attracts foreign
- investment
- Severaljoint research and developmentprojects with well-known
- foreign companies and universities.
- Thegeographical location of Korea- Close to Central China can be
- regarded another factor for IT advantages.
- Throughexport of CDMA technology -solid network among the
- south Asian nationsis established.
- These factors will enhance the national IT competitiveness for sure.
Conti.. Source:http://www.ips.or.kr/ncr/index.asp Source:www.outsourcing-service-india.com 23.
- Korea has secured leading position in semiconductor market
- especially forDRAM (Dynamic Random Access Memory) - DDR RAM
- and SD RAM
- Korea isUnited Statesmost significant trading partner
- Cheap and Quality Hardware production units available.
- IT Enabled Services like BPOs and KPOs Yantram Solutions
- Korea ranks itself in top manufacture in LCD and Mobile phone,
- example LG group, Samsung group, Doosan Group, DiaBell .
- Korea - the leading position in IT related production
Source:http://www.bsau.org/ Source:http://corsairmemory.com/products/twinx10255.htm 24.
- Korea - theleading position in all IT related production
- The proactive effort- R&D and market expansion , as well as
- government support are expected.
- Korean government plans to extend itsfinancial supportfor R&D
- especially in 10 core technologies
- Initiated several huge project with private sectors
Source:http://www.bsau.org/ Source:http://corsairmemory.com/products/twinx10255.htm 25.
- Korea - favorable business environments- for venture firm through
- -Quick registration process,
- -Lower entry barriers in IT industry,
- -Lower cost using telecommunication infrastructure,
- -Diverse capital resources
- -Government supports
- These activities result in huge number of small, medium-sized
- venture companyin IT industry
- And Hence it leadsto severe domestic rivalrybecause of market
- competition.
- Encourages the continuous development ofInnovative technology
- and improvement of business models in business sectors.
Source:www.technology.gov/reports/korea/korea.pdf 26. 27.
- "Competitive Advantage of Nations" Michael E.
- Porter, March~April, 1990 HBR Download available at
- http://online.sfsu.edu/~yywong/Porter1990HBR.pdf
- (2) "Global Information Technology Report 2001~2002" from World
- Economic Forum at
- www.weforum.org/site/homepublic.nsf/Content/Global+Informat
- ion+Technology+Report+2001-2002
- (3) "Asia's New Tech Competitors" atwww.nsf.gov/sbe/srs/s4495/conten3d.htm
- (4) "National Competitiveness Analysis " from the Institute of
- Industrial Policy Studies-http://www.ips.or.kr/ncr/index.asp
- (5)www.outsourcing-service-india.com
- (6)http://www.bsau.org/
- (7)http://corsairmemory.com/products/twinx10255.htm
- (8)www.technology.gov/reports/korea/korea.pdf
- (9)http://www.quickmba.com/strategy/global/diamond/
28. (1) Charles W. L. Hill&Arun K. Jain,International Business, Fifth Edition, 2006, TATA McGraw-Hill (2)John D. Daniels & LeeH. Radebaugh,International Business, Ninth Edition, 2003, Pearson Education 29. 30.