International Buiness Analysis of Porters Diamond Theory

The government needs to push and encourage companies and organization to a more competitive level, in this manner, increasing performance and eventually the overall combined benefits. Competitive Advantage and Porter’s Diamond Theory Competitive advantage is that area of expertise of a firm where it outperforms its competitors or more specifically, other nations or countries. Through researches, it has been observed that marketing plays a vital role in building up the competitive advantage of companies. The name ‘Diamond’ has been labeled due to the four factors, which the natural environment conceptualizes. According to Porter’s Diamond Theory, a country can capitalize its competitive advantage in any of the areas where it excels other countries. For instance, due to the climate and weather conditions of European countries, Starbucks is very popular among those countries but if the company intends to expand itself in South East Asian countries, then the weather conditions of South East Asia do not permit the company to expand its business in these areas. Therefore, European countries have a competitive advantage of having cold weather. Another example includes Nike. Nike chose China for manufacturing concerns due to cheap labor and overhead expenditures in lieu of European countries, where overhead expenditures and labor are much higher as compared to China. Therefore, China possesses a competitive advantage of having low labor and overhead costs than European Countries. Droge and Neven (2001) stated that it is difficult for agricultural food SMEs to become and stay competitive in this period of globalization. The paper of Droge and Neven (2001) argues that the holistic diamond model of Porter is superior in investigating the cluster dynamics. here cluster is defined as a homogenous group of firms involved in marketing the specific product in a specific location. Droge and Neven (2001) concluded that despite the fact that this model has not been tested in most of the developing countries, but those rare researches that have been conducted to validate the diamond model, affirm that the diamond model of Porter is intrinsically better.