By students, for students.

ISM crash course: single and double diamond models

In Management, Marketing on January 18, 2013 at 11:12 am

michael porter

Diamond models – CSAs made pretty.

The word of business is indebted to Michael Porter, Harvard Professor. He thought up many of the economic models we use today, particularly when judging, explaining and predicting competitive advantage. A competitive advantage consists of a resource, strategy, innovation or operational efficiency which strengthens a business in comparison to rival enterprises in its industry.

Determinants of competitive advantage

Porter saw location as a crucial source of competitive advantage due to six broad factors:

  • Factor conditions: physical resources, human resources, knowledge resources, capital resources
  • Demand conditions: customer base raises capital, sophisticated consumers force innovation
  • Related and supporting industries: partners in cost efficiency and upgrading market offer
  • Firm factors: strategy, structure, rivalry
  • Government: influence to above determinants of competitiveness
  • Chance: factors beyond the firm’s control which can disrupt competitive positions

Single diamond model

The single diamond model demonstrates the interaction of these forces in the marketplace. It was published in Porter’s The Competitive Advantage of Nations in which the scholar examines eight developed nations and two newly industrialised countries.

single diamond

The model has been successfully applied to clusters – groupings of small industries where the performance of one is related to the performance of the others. However, by itself, the single diamond model cannot fully explain the international success of multinationals relative to industry rivals.

Double diamond model

The double diamond model, developed by Alan Rugman, seeks to fill this need. Since Rugman firmly believes that international trade is driven by the intraregional trade and investment of MNEs’ (trade within their region), he argued that firms within countries could also access regional advantages. In this way the domestic diamond (CSAs included in the single diamond model) were added to by region specific advantages (RSAs).

double diamond

Example

Tata Motors Limited

Tata Motors LTD (TML), an Indian multinational, has successfully exported its low price and fuel efficient vehicles across Asia. This has been supported by strategic joint ventures, acquisitions and mergers – beginning with Daewoo in Korea in 2004. Tata Motors relies on a proficient in-house development and design team to make its products suitable for export, adapting them to the regulatory and emission restrictions of overseas markets. TML has leveraged its FSAs by exporting to Africa and ASEAN countries with CSAs closely resembling those of the firm’s home nation. The country specific and regionally-based advantages which make up TML’s double diamond are listed below:


TML double diamond

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