National Diamond

Categories: Company Management

Michael E. Porter was an economist who was all about economic competition. He came up with a theory, the National Diamond, or the Porter Diamond, to show the competitive advantage industrialized nations have in the international marketplace. It can also be scaled down, used for a company, modeling their competitive advantage in their product’s or service’s marketplace.

The national diamond takes into account not just the nation or company, but their environment. This makes the theory meant to be used in the real world, rather than representing a theoretical model...particularly showing what a government or firm can do to give itself the most competitive edge possible.

It’s not a diamond because it’s fancy or sparkly, but because there are four umbrellas under which all the factors of competitive advantage live, modeled in the shape of a diamond: strategy, structure, and rivalry is one umbrella; factor conditions is another; demand conditions is yet another; and the final one is related industries. Some of these things a nation (or firm) doesn’t have control over, while others they do have control over. The national diamond gives no excuses, only potential options (think: increase your tech, your skilled labor, etc.) as to how to do better.

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