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Porter's Diamond Model

Porter's Diamond Model assesses the competitive advantage of industries by evaluating factor conditions, demand conditions, related industries, and firm strategy, structure, and rivalry. Value Chain Analysis breaks down organizational activities to understand value creation and competitive advantages, focusing on primary and support activities. Integrating both models provides a comprehensive view of macro and micro factors influencing industry success.

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16 views19 pages

Porter's Diamond Model

Porter's Diamond Model assesses the competitive advantage of industries by evaluating factor conditions, demand conditions, related industries, and firm strategy, structure, and rivalry. Value Chain Analysis breaks down organizational activities to understand value creation and competitive advantages, focusing on primary and support activities. Integrating both models provides a comprehensive view of macro and micro factors influencing industry success.

Uploaded by

aribaazam1001
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Porter’s Diamond

Model
Purpose

• Porter’s Diamond Model is used to assess the


• Competitive advantage of industries within a nation or region.
• It helps you understand how the environment supports or
hinders an industry’s success,
• Directly contributes to its attractiveness for investors and
firms.
Factor Conditions:

• Assessment :
•Evaluate the quality and availability of resources
• Skilled labor,
• Infrastructure, and technology,
• Crucial for the industry.
•Attractiveness Insight:
•Industries located in regions with strong factor conditions
• Lower production costs
• Higher quality outputs
• Better innovation Capabilities.
•Example:
• Semiconductor industry thrives in regions with a highly skilled technical workforce and robust R&D facilities
• Making it attractive to new entrants and investors.
Demand Conditions:

• Assessment:
• Analyze the sophistication and size of the local market.
• A demanding and knowledgeable customer base can push firms to
innovate.
• Attractiveness Insight:
• Industries that face strong domestic demand often develop higher quality
and innovative products, making them more competitive internationally.
• Example
• Automotive industry in Germany
Related and Supporting
Industries:

• Assessment:
• Look at supplier industries and related sectors that can provide
inputs, services, or complementary products.
• Attractiveness Insight: Clusters of related industries can
reduce costs, foster innovation, and create a supportive
ecosystem.
• Example:
• ??
Firm Strategy, Structure, and
Rivalry:

• Assessment:
• Examine how companies are organized, their strategic choices, and the level of
local competition.
• Attractiveness Insight:
• Intense but healthy competition can drive firms to become more efficient and
innovative.
• This competitive pressure enhances the overall strength of the industry.
• Example:
• The competitive rivalry in Japan’s electronics industry pushes firms to continually
improve their processes and innovate, which attracts global partners and
customers.
Value Chain
Analysis
Purpose:

• Value Chain Analysis is a micro-level tool


• Used to break down the activities within an organization or
industries
• To understand how value is created and where competitive
advantages lie.
• It highlights the efficiency and effectiveness of each activity
that contributes to the final product or service.
1. Primary Activities:

• Inbound Logistics
• Definition: This involves receiving, storing, and distributing raw
materials or inputs needed for production.
• Examples:
• A car manufacturer receiving steel, rubber, and electronics from
suppliers.
• A restaurant sourcing fresh ingredients from local farms.
• Value Addition: Efficient inbound logistics reduce costs and
ensure timely production.
Operations

• Definition: The processes involved in transforming raw


materials into finished products or services.
• Examples:
• A smartphone manufacturer assembling components like
processors, cameras, and batteries.
• A bakery converting flour, sugar, and eggs into cakes and
pastries.
• Value Addition: Streamlined operations improve quality,
reduce waste, and increase output.
Outbound Logistics

• Definition: Activities related to storing, distributing, and


delivering the final product to customers.
• Examples:
• An e-commerce company using warehouses and delivery
services to ship products to customers.
• A beverage company distributing bottled drinks to retail
stores.
• Value Addition: Efficient outbound logistics ensure timely
delivery and customer satisfaction.
Marketing and Sales

• Definition: Activities aimed at promoting and selling the


product or service to customers.
• Examples:
• A fashion brand running social media campaigns to attract
customers.
• A car dealership offering test drives and promotional
discounts.
• Value Addition: Effective marketing and sales strategies
increase brand awareness and drive revenue.
After-Sales Service

• Definition: Activities that provide support to customers after


they have purchased the product or service.
• Examples:
• A tech company offering customer support and warranty
services for its devices.
• An automobile company providing maintenance and repair
services.
• Value Addition: Excellent after-sales service enhances
customer loyalty and builds long-term relationships.
2. Support Activities

• Infrastructure
• Definition: The organizational structure, systems, and processes that
support the entire value chain.
• Examples:
• A company’s financial planning, legal compliance, and
management systems.
• IT systems that streamline communication and data management.
• Value Addition: Strong infrastructure ensures smooth operations and
decision-making.
Human Resource Management (HR)

• Definition: Activities related to recruiting, training, and


retaining employees.
• Examples:
• A tech company offering training programs to upskill its
engineers.
• A retail chain providing employee benefits to reduce
turnover.
• Value Addition: Skilled and motivated employees improve
productivity and innovation.
Technology Development

• Definition: Activities involved in research and development


(R&D), innovation, and technological advancements.
• Examples:
• A pharmaceutical company investing in R&D to develop
new drugs.
• A software company developing AI-powered tools to
enhance user experience.
• Value Addition: Technology development drives innovation
and keeps companies competitive.
Procurement

• Definition: The process of sourcing and purchasing raw


materials, equipment, and services.
• Examples:
• A construction company procuring cement, steel, and
machinery.
• A restaurant purchasing kitchen equipment and
ingredients.
• Value Addition: Efficient procurement reduces costs and
ensures the availability of quality inputs.
Application of Value Chain Analysis

• Value Chain Analysis helps industries and organizations:


• Identify Competitive Advantages:
By analyzing which activities add the most value, companies can focus on excelling in those areas.
Example: Apple’s focus on design and technology development gives it a competitive edge.

Optimize Costs:
Companies can identify areas where costs can be reduced without compromising value.
Example: Walmart’s efficient inbound logistics reduce costs, allowing it to offer lower prices.
Differentiate Products/Services:
By enhancing specific activities, companies can differentiate themselves from competitors.
1. Example: Tesla’s emphasis on innovation and after-sales service sets it apart in the electric
vehicle market.
Integrating Both Models for a
Comprehensive View
• Macro vs. Micro Perspectives:
• Porter’s Diamond provides insights into the broader
environmental and national factors that shape an industry’s
potential. It helps identify why industries thrive in certain
regions and what external factors contribute to their success.
• Value Chain Analysis digs into the operational and strategic
details within firms. It explains how value is created and
sustained at the firm level, which cumulatively affects the
industry’s performance.

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