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Porter S Diamond Model
Porter S Diamond Model
Porter’s Diamond Model can be used to assess the national competitive advantage of Indian automobile
industry.
Factors of Production:
Among the basic factors, low labor cost is one of the key characteristics of the Indian automobile
market. The average manufacturing wages are below 1000 USD in India which is far less than other
global auto industry leaders like South Korea or USA. The Paved Highways (per capita) for India is 1.4194
mm which is close to the global standard. This is a crucial infrastructure factor.
When it comes to advanced factors of production however, India has room for improvement with 5.3%
and 6.1% telephone and internet users respectively. The adult literacy rate which is an indicator for
investment in human capital and the level of skill that can be extracted from the workforce is only 61%
in India.
Demand conditions:
The rise of the middle class in India has directly affected the sales volume of automobiles. The recent
surge in per capita income of India created a sizable buying population. With the introduction of foreign
firms, these buyers have enjoyed quite a few switching options. The firms naturally had to keep up with
the latest innovations to hold on to their customer base. The large size of population in India also meant
that economies of scale could be achieved by the leading firms. As the industry matured, the higher
sophistication levels sought by the buyers caused the firms to come up with better product which in turn
contributed to increased demand in the international market.
References:
1. Society of Indian Automobile Manufacturers. (2006). The Indian Automobile Industry: Statistical
Profile 2005-06. New Delhi. Retrieved from www.siamindia.com/scripts/installed-capacities.aspx,
retrieved June 2009
2. Balakrishnan, K., Seshadri, S., Sheopuri, A., and Iyer, A. (2007), “Indian Auto-Component Supply Chain
at the Crossroads,” Interfaces, 37(4), 310-326.