Porter’s Diamond Theory Analysis
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Published: Tue, 05 Dec 2017
CRITICALLY ANALYSE PORTER’S DIAMOND THEORY. APPLY IT TO EXPLAIN THE INTERNATIONAL COMPETITIVENESS OF AN INDUSTRY OF YOUR HOME COUNTRY.
Overview of Porter’s theoretical perspective
The theory of Porter is a study which works as a tradition that is related to the neo-classical economics with the nature of self adjusting nature of markets. The theory of Porter places innovation and industrialisation of geographic which is one of the number of theories for competitive advantages which aims at the process and development (O’Connell et al., 1997). The industries which work within the nations are focused by the Porter’s theory. Competitive advantage is given by the home nation with certain characteristics and concentration of geographic and this process is enhanced by the rivalries. The systemic character of the Porter’s Diamond Model is shown in Figure 1 which outlines the components of it. Although, determinant of diamond theory interact each other but the systemic natures variable in diamond theory. The arguments on two elements are raised by the Porter which are – concentration of industry geographic and the domestic rivalry and these two elements has simply a great power to make a system by changing this diamond. It promotes the entire national diamond upgrading because of this domestic rivalry. The Porter theory translates it into system because of its magnifying principle of the interactions in the geographic concentration. The final stage of the Diamond Porter’s Model is the linkage between the industries and it promotes clustering to the systemic nature (Clancy et.al., 1999).
Competitive Advantage, Marketing and Porter:
Any firm which achieve success is known as Competitive advantage which is not a domain of any of the single academic discipline in it. Thus through a review which reveals that marketing plays a central role in building up a competitive advantage. A number of popular approaches include: strong market positions with products and services are not easily substituted, entry- barriers, strong bargaining position, balanced portfolios; mobility barriers; core competencies, innovation and speed or time based competition (Eccles and Nohria, 1992). Here security in market positions, maintains the stable flow and enhance the emphasis of predominance. As per within the organisations, competitive advantages is first related to the marketing function. The work of Michael Porter exaggerated marketing as an extensive in order to address “competitive advantage.” Porter’s “five model” (Porter, 1985) provides the basis for structural analysis of industries in most texts (Baker, 1992; Bradley, 1995). The domain of macro- economists was aimed in such a way that was highly popularised by the Porter’s model, mainly the study of competitiveness. This shows that the study of firm advantage needs to take place in the context of a national environment. The name Diamond was tagged for four determinants (and 2 exogenous variables) which was conceptualised by the national environment. Thus, increasingly, marketing courses and texts incorporate the diamond as part of the analysis of industry (Baker, 1992).
The important innovation in Porter’s work for business researchers across various sectors is a translation into a framework of ideas and concepts from different fields. The dynamic and evolutionary view represents the model as the creation of firm advantage depending upon a number of traditions; for example- the theory is based upon the resource and industrial organisational economics. Porter not only provides a point of reference for analysing the research but also a model for strategy research.
Analysis with Porter’s Diamond Framework:
The enabling environment providing the competitiveness only helps the firms to leverage its competitive advantage whose are supporting the activities of the firms. Porter’s Diamond theory reflected all these fundamental concepts in its model and in every question put by the Porter lies under the elements which are categories under four in his model. He considered that the company’s analysis should not be done by the approach of backward looking but should be considered by the view of looking forward. But this forward looking approach creates an idealistic scenario rather creating of an realistic approach. Although taking into consideration the future perspective, an assumption is being mounted by Porter, the Diamond Model functionality accommodates experiences of the past which indicates the flexibility. Thus, the model is created considering the perspective to be balanced which combines the past experiences with the future expectations. In the four elements of the analysis one more element Government – is added as this element plays a vital role in competitive environment nationally for the industry.
Indian Shrimp Industry on Porter’s Framework:
In the world of Shrimp productions India occupies top five positions. After china in the production of aquaculture it is the second largest producer of aquaculture. Contribution of aquaculture is 21.56% by volume and by value its 49.76% of overall seafood export production whereas by volume of farmed shrimps it contributes 76% and 83% by value of exports of shrimps (Rajitha et al., 2006). The current exploitation for shrimp farming in India is only 16% which is out of 1.2 million hectors are available for farming. In the country 90% of the shrimp farming are owned by the farmers of small and marginal levels. The black tiger shrimp is the major cultured spices (Penaeus Monodon). According to the research 58% of the total export values, in the export basket frozen shrimps is the largest items, of which the cultured shrimp shares above 80% (MPEDA, 2006). With the help of Diamond model of Porter’s the national competitive environment and the Indian shrimp industry van be assessed and is presented in Figure 1.
Strategies of Firm, Rivalry and Structure:
The farmers, exports and processors and the allied players are comprised under the Indian shrimp industry. 30 million is the capacity of production average in hatcheries of over 290 shrimp and 30 feed mills with a installed capacity of total annually of 250,000 metric tonnes. From a area of brackish water production of shrimp in India is 1, 43,000 metric tonne within a field of 140,000 hectares (MPEDA, 2006). In the mid 1980’s the production of shrimp farming started in India and there is a rapid growth of cultured farming of shrimp through 1990s (Kumar et al, 2004).
Only 2.0 hectare area of water is own by the more than 90% of the aqua farmers. In the country farms below 5.0 hectare of the total shrimp area farms occupies 65%. Among the 500 leading companies in India only 10 companies are involved in aquaculture. These 10 companies occupies 1898 hectare of land, of which shrimp farms contributes 758 hectares. The water spread in total is constituted just 0.54% of this which is out of the 140,936 hectare in country is developed for culture of shrimps.
On the front of the processor, there could be an either exporter only or the processor – cum – exporter. The Indian shrimp company has most marginal players except the large player handful. The Indian company of shrimps does not seen interested in foreign investors except Thailand. Except few of the companies like the ITC, Hindustan Liver Ltd etc. most of the companies are oriented family based. The growth which has evolved from the last few decades created this situation. The holdings on an
Average basis are small and policy meyaking is fragmented and difficult to make implementations.
The entire coastal belt of India comprises of 369 freezing plants which are spread over these belts in which India has a v well developed infrastructure. The processing of fish is mainly from exports. India needs to develop its infrastructure for maintaining the quality for leading in the processing facilities. In India one can reduce the production cost easily because of the availability of the cheap labour for the shrimp which is one the amongst all the shrimp producing countries. The women workers are mostly more recruited in shrimp industries because of the dealt skilful hands of the women’s workers. Although these women’s are not professionally trained but learn how to do the work after bringing them into the factories.
The two of the most important factors are rendered in a scenario of flexibility which are – support and labour and development support- which are required for the technology development and advancement of knowledge which are presented for good measure.
According to Porter (1990) one can be demanding if the buyers have an international outlook with the home base buyers. Their demands are really sophisticated and demanding. They need the product to be highly standardised and need to be full of quality. In India, these kind of businesses like exports and marine exports does not exist. These kinds of reasons are responsible for which India does not able to value chain move up. Customers export bulk quantities from India for shrimps and sold it to the other destinations after repackaging like USA, Europe and Japan. Retail packaging is different from export packaging in bulk. After Thailand, India is the second largest shrimps exporter in the world but shrimps of India does not able to create its own brand like Thailand in the global markets.
Therefore, the exporters get little exposures because of the less demanding market and hence cannot get the proper international exposure to compete in the international conditions. This lead to the opportunities to be limited and limited challenges in an international competition to understand. In this conditions, exporter just follow certain forms of rules for exports, starts losing the opportunities but learns new facets about international trade and tries to spread the business.
The support and government intervention to the shrimp industry generally comes majorly through Marine Products Export Development Authority (MPEDA) especially for exports, under the government under industries of India and Ministry of Commerce and some of institutions of marine research. The policies related to export are recommended by MPEDA to the Commerce Ministry of the central government and the decisions foe the policies are taken by the MPEDA. In financial institutions this body acts like a liaison agency between prawn and shrimps stakeholders and farmer’s entrepreneurs and farmers etc.
In the conclusion, it is clearly indicated that the government intervention plays a significant element for the study as Porter considered this element to be the choice of optimism. The developing countries generally face these kinds of scenarios.
The concepts like international success, national environment and the competitiveness are the concepts who have references of several parameters. Although to understand these kinds of parameters, the theory of flexibility is useful but somehow Porter’s Diamond Theory also suggests about these parameters. The research showed data about the shrimp industry of India with their business environments.
The importance of this essay limits only to the shrimp industry, preliminary understanding of competitiveness of shrimps to various export sectors of India. This competitiveness is in the context of environments to be taken nationally. The scope for the future research is based on the detailed empirical research in the context of diamond model analysis.
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