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1. To explain on the basis on “Porter’s
Diamond”, why some nations succeed
and others fail in International
Competition!
2. A case of the Korean Economy based on
Porters Diamond…

DEMAND CONDITIONS B. PORTER’S DIAMOND MODEL 3. Qno. SUPPORT INDUSTRIES D. GOVERNMENT F. PORTER’S DIAMOND EXPLANATION A. PORTER’s PREDICTIONS 5. INTRODUCTION – Qno.# 2 CASE – Information and Telecommunication . FIRM STRATEGY. CHANCE 4. FACTOR ENDOWMENTS C.Korea's Competitive Advantages .# 1 2. PORTER’s CRITICISM 6.1.RIVELRY E.

by Michael Porter of the Harvard Business School. Jain.quickmba.Related/Support L. International Business. Demand Source: http://www. • Porter theorizes 4 Broad attributes – Factor Endowment. TATA McGraw-Hill . • Porter’s Diamond Model is used to solve this puzzle • Developed in 1990. 2006. industry. Fifth Edition.• Acc to Heckscher-Ohlin theory and Comparative Advantage theory • E.g. A nation uses its resources very productively… HOW? BUT • Above theories give only Partial Explanation to the Question. Firm Strategy and Source: Charles W. Hill & Arun K.com/strategy/global/diamond/ conditions.

IN B M T CO ED AC P M I E M N R E V NT O G N BI M T CO ED C PA IM Why do some fail? The diamond is mutually reinforcing CH A N CE .

Jain. L. 2003. TATA McGraw-Hill Source: John D. Daniels & LeeH. Ninth Edition. Pearson Education . Fifth Edition.• 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. Radebaugh. 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. International Business. 2006. International Business. Hill & Arun K.g.

E. E.g. Source: http://www. 3 • Local demand for cellular phones in scandinavia made nokia and ericson to invest in that in other developing nations. These consumers force and help French wineries to produce high quality wines.com/strategy/global/diamond/ .g. 2 • Japan’s knowledgeable buyers of cameras made that industry to innovate and grow tremendously E.quickmba. The French are sophisticated wine consumers. 4 • The French wine industry.g.

2003. • Basic factors can provide only an initial advantage • They must be supported by advanced factors to maintain success E. location and demographics • ADVANCE FACTORS – Communication Infrastructure. International Business. skilled labour. Research facilities and so on. Daniels & LeeH. Radebaugh.• BASIC FACTORS – Natural resources. climate.g. Pearson Education . Ninth Edition. • 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.

• Large pool of engineers .quickmba.very vital for a manufacturing industry. Fifth Edition.g. International Business. L.com/strategy/global/diamond/ Source: Charles W. Hill & Arun K. TATA McGraw-Hill . • Japan has high priced land and so its factory space is at a premium. Source: http://www. 2 • Japan a country which lacks arable land and mineral deposits.E. Jain. 2006.

L. Hill & Arun K.quickmba.g. • The glazes production was also favourable. 2006. Source: http://www.• Benefits of investment in advanced factors by Suppliers and related industries can spill over • Creates clusters of supporting industries. Fifth Edition. E. • These two were the main composition of producing tiles. thereby achieving a strong competitive position internationally.com/strategy/global/diamond/ Source: Charles W. International Business. TATA McGraw-Hill . • The enamel production unit was available. • This reduces the Transportation cost. Jain.

2 • Switzerlands success in pharmaceutical industry is closely related to its international success in technical dye industry. E.pdf .edu/~yywong/Porter1990HBR.sfsu.E.g.g. 3 • Swedish strength in fabricated steel industry is the reason for development in the Sweden's specialty steel industry Source: http://online.

• Low entry barriers to market in the tile industry • Rivalry became very intense • Breakthroughs in both product and process technologies Source: John D. International Business. • Presence of domestic rivalry improves a company’s competitiveness E. Radebaugh. 2003.g. Pearson Education . Ninth Edition. Daniels & LeeH.• Long term corporate vision (Strategy) is a determinant of success • Ability of the companies to develop and sustain a competitive advantage requires the 4th attribute.

Ninth Edition.edu/~yywong/Porter1990HBR. family-run firms. 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 can’t have a lot of stock taking up space. Source: http://online.g.E.pdf Source: John D. so to cope with the potential of not have goods around when they need it • They innovated traditional inventory techniques). Pearson Educati . Radebaugh.g.sfsu. E. Daniels & LeeH. 2 • Germany tends to have hierarchical management structures composed of managers with strong technical backgrounds and • Italy has smaller. International Business. 2003.

E. • 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. 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.g.nsf.• Chance Events such as major innovations.htm . Source: www.gov/sbe/srs/s4495/conten3d.

Ninth Edition. Radebaugh.• Countries should be exporting products from those industries where all four components of the diamond are favorable. International Business. Source: John D. Daniels & LeeH. • while importing in those areas where the components are not favorable. 2003. Pearson Education .

• Government can influence on any four components of the diamond. Pearson Education . Ninth Edition. Daniels & LeeH. Source: John D. International Business. Radebaugh. • Porter developed this paper based on case studies and these tend to only apply to developed economies. 2003.

.Information and Telecommunication Korea's Competitive Advantages (2002) • Analysis of Korea’s Competitive Advantage with Michael E. Porter's Diamond Framework • Korea .New developed countries Information and Telecommunication.

sophisticated internet usage • IT effectively used . Source: www. Business & government sectors • The competitive market situation in online shopping malls and rapid.nsf/Content/Global+Information+Technology+R • Hence Strategic use of IT is demanded due to the intensified .individual level.higher quality service at cheaper to users.weforum.org/site/homepublic.• High computing and Internet penetration rate since 1998. expansive development in wireless internet service • Forcing market players . • Large user base of Internet .

better service and created favorable business environments for business.better quality.weforum.• Korean government’s effort to develop IT industry Privatization and Market Deregulation in Telecommunication market • Encouraged fair market competition in Telecommunication market • Resulting in lower price .nsf/Content/Global+Information+Technology+R • E-commerce exceeded 45 billion USD and .org/site/homepublic. Source: www.

Favorable environment for development of IT industry • Over 90% of nation area is wired with broadband internet network • IT workforce in Korea accounted for 447.000 (2.continuous effort .ips.Facilitating the usage of information technology. .com .outsourcing-service-india. • Overall level of education in Korea is relatively high • Korean government support educational institutions related to IT Source: skills http://www.asp Source: www.kr/ncr/index.Improvement in IT infrastructure. .or.• Korean Government.Korean IT policies .1% of total workforce).

com • These factors will enhance the national IT competitiveness .kr/ncr/index. • Through export of CDMA technology.Conti. • DaeDeok Valley.solid network among the south Asian nations is established.asp Source: www.Close to Central China can be regarded another factor for IT advantages. Source: http://www.an important IT cluster -Attracts foreign investment • Several joint research and development projects with wellknown foreign companies and universities.ips. • The geographical location of Korea ..outsourcing-service-india.or.

• IT Enabled Services like BPOs and KPOs – Yantram Solutions • Korea ranks itself in top manufacture in LCD and Mobile phone. Doosan Group.htm .org/ Source: http://corsairmemory.bsau.com/products/twinx10255. DiaBell. Source: http://www. example – LG group. Samsung group.• Korea has secured leading position in semiconductor market especially for DRAM (Dynamic Random Access Memory) DDR RAM and SD RAM • Korea is United States most significant trading partner • Cheap and Quality Hardware production units available.

• Korean government plans to extend its financial support for R&D especially in 10 core technologies • Initiated several huge project with private sectors Source: http://www. as well as government support are expected.the leading position in all IT related production • The proactive effort .org/ Source: http://corsairmemory.com/products/twinx10255.R&D and market expansion.bsau.• Korea .htm .

pdf .favorable business environments . - Quick registration process.for venture firm through infrastructure.• Korea . mediumsized venture company in IT industry • And Hence it leads to severe domestic rivalry because of market competition. Lower cost using telecommunication Diverse capital resources Government supports • These activities result in huge number of small. Lower entry barriers in IT industry.technology.gov/reports/korea/korea. Source: www.

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htm  (4) "National Competitiveness Analysis " from the Institute of Industrial Policy Studies .com/strategy/global/diamond/ . 1990 HBR Download available at http://online.org/site/homepublic.nsf.sfsu. Porter.org/ (7) http://corsairmemory.weforum.(1) "Competitive Advantage of Nations" Michael E.asp (5) www.nsf/Content/Global+Informat ion+Technology+Report+2001-2002  (3) "Asia's New Tech Competitors" at www.com/products/twinx10255.kr/ncr/index.gov/sbe/srs/s4495/conten3d.  March~April.ips.outsourcing-service-india.com (6) http://www.gov/reports/korea/korea.quickmba.pdf  (2) "Global Information Technology Report 2001~2002" from World Economic Forum at      www.edu/~yywong/Porter1990HBR.htm (8) www.bsau.technology.or.http://www.pdf (9) http://www.

L. Hill & Arun K. 2003. Daniels & LeeH. TATA McGraw-Hill (2) John D.(1) Charles W. Jain. 2006. Internatio Ninth Edition. International Busin Fifth Edition. Radebaugh. Pearson Education .