Porter's diamond

Porter's diamond is a model that determines the factors that make countries more competitive and through which they achieve business success, presented for the first time in 1990 by Michael Porter in his book "The Competitive Advantage of Nations" this model it is the synthesis of the detailed study of 10 nations and what factors favor the competitiveness of a country.

Porter’s diamond, also known as the diamond of competitiveness, establishes 4 attributes which directly influence the competitiveness of a country or sector as well as the companies that integrate it, these 4 attributes or factors are intrinsically related to each other where the increase or reduction of any of them positively or negatively affects the rest.

The 4 factors of Porter's diamond are:

The conditions of the factors of production refer to the existence of skilled labor as well as scientific knowledge, the existence of natural and nearby resources, the presence of adequate infrastructures …

The demand conditions refer to the presence of a demanding local demand and that influences the companies towards a continuous improvement of their products and / or services, pushing them to a continuous innovation accompanied by high quality standards.

The related and support sectors refer to the existence of competitive suppliers that allow fast and secure access to their products and / or services, as well as the presence of exchanges of information between the company / supplier that allows them to grow mutually.

Finally the strategy, structure and rivalry make reference to the process and the facility for the creation, organization and management of the companies of a certain sector, as well as the degree of rivalry that they maintain among them.

Porter diamondThus, we find geographical regions (such as Silicon Valley) where companies from a specific sector have been located and developed, with highly qualified professionals and large knowledge bases, both in the parent companies and in suppliers of recognized worldwide prestige, working in a continuous environment of innovation due to the demanding and changing market of the sector, all promoted in an environment of high competition and rivalry which favors the global competitiveness of the sector.

In these regions we can observe how the diamond acts in its 4 dimensions giving rise to a network of highly competitive companies interconnected with each other, giving rise to competitive clusters.

Michael Porter affirms that for a country, sector or company to be competitive it is necessary that these 4 components act in a balanced way, it is not necessary for everyone to act 100%, but if any of them has significant deficiencies, it will reduce global competitiveness.

In addition to these 4 factors, Porter defined two other external factors that influence the diamond and therefore competitiveness, these 2 additional factors are:

Causality refers to unforeseen events that are out of control of both the companies and the governments in which they are located, events such as wars, financial crises, political decisions of foreign governments, irruption of new radical technologies ...

The government refers to the set of laws and government decisions that can positively or negatively influence the 4 factors of Porter's diamond, the government can invest money in the creation of training and research centers and promote laws that stimulate R & D + i (conditions of production factors, related sectors and support), on the other hand the government can act as buyer and customer of products and / or services as means of transport, defense ... (Conditions of demand), likewise government can establish fiscal policies that favor the creation of companies (strategy, structure and rivalry).

The study and analysis of Porter's diamond will allow us to know the degree of competitiveness of a country or company, allowing us to know how we can improve and increase its competitiveness.


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