International

Business
Lecture No,23
By
Dr.Shahzad Ansar

Porters Diamond
(Harvard Business School,
1990)
The Competitive Advantage
of Nations.
Looked at 100 industries in
10 nations.
Thought existing theories
didnt go far enough.

 Question: Why does a

nation achieve international
success in a particular
industry?

Determinants of National
Competitive Advantage
Factor endowments: nation's
position in factors of production
such as skilled labor or
infrastructure necessary to
compete in a given industry.

Demand conditions: the nature

of home demand for the industrys
product or service.

 Related and supporting industries:

the presence or absence in a nation
of supplier industries or related
industries that are nationally
competitive.
Firm strategy, structure and rivalry:
the conditions in the nation
governing how companies are
created, organized, and managed
and the nature of domestic rivalry.

4-30

Porters Diamond
Determinants of National Competitive Advantage
Firm Strategy,
Structure and
Rivalry

Factor Endowments

Figure 4.6

McGraw-Hill/Irwin

Demand Conditions

Related and
Supporting
Industries
2003 The McGraw-Hill Companies, Inc., All Rights

The Diamond
Success occurs where these
attributes exist.
More/greater the attribute,
the higher chance of
success.
The diamond is mutually
reinforcing.

Determinants of
National Competitive Advantage

4-32

Chance
Company Strategy,
Structure,
and Rivalry
Two external
factors that
influence the
four
determinants.

Factor
Conditions

Government

McGraw-Hill/Irwin

Demand
Conditions
Related
and Supporting
Industries

2003 The McGraw-Hill Companies, Inc., All Rights

4-33

Factor Endowments
Taken from
Heckscher-Olin
Basic factors:
natural
resources
climate
location
demographics
McGraw-Hill/Irwin

2003 The McGraw-Hill Companies, Inc., All Rights

4-33

Factor Endowments
Advanced
factors:
Communication
skilled labor
research
technology
McGraw-Hill/Irwin

2003 The McGraw-Hill Companies, Inc., All Rights