Earlier article refer to the theories of International trade.
Append below in salient points Porter’s Diamond Theory
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Michael E Porter’s Diamond Theory:
Advocates the following:
- A nation could create new advanced factor endowments like skilled labor, strong technology and knowledge base, government support and culture.
- He used a diamond shaped diagram as the basis of framework to illustrate the determinants of national advantage consisting of Factor conditions, Demand conditions, Related and Supporting industries, and Firm strategy.
- Using the four conditions and interact them will assure success in international trade
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Porter’s Diamond Theory on The Four Determinants And Interaction For Success In International Trade:
Factor Conditions:
- Based on the view of Heckcher-Ohlin theory re: the perspective of classical factor endowments like land, labor and capital but Porter’s Diamond, extended the issues into factors of innovation, creativity, quality and training
Demand Conditions:
- Based on new trends of consumer preferences
- Examples like the using of the Internet(eBay, Amazon.com is becoming popular for the purchase and sale of on-products & services to meet the needs of domestic and international markets)
Related and Supporting Industries:
- Refer to the increase in the number of suppliers to meet the industry production, marketing and distribution needs every time a new industry emerges.
Firm Strategy, Structure And Rivalry:
- Important when competing in world markets as firms must be able to create strategies and continually provide high quality goods and services to stay ahead.
- Important for firms to are competing internationally to be on pars with competitors on areas like research and development, advertising, promotion, branding, staff training and others
[ Click here to go to all the topics on International Trade ]
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