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GSM Lecture 5Management > Global Strategic Management > Conditions > Macro/microenvironment > Porter's 5 Forces > 5 Forces explained > 5 Forces continued > Market analysis > System views > Macroenvironment > STEP > Porter's Diamond > Diamond explained
Diamond explainedFactor endowments Applicable at domestic and international level, the evaluation of factor endowments can be drawn from the Hescher-Ohlin model of comparative advantage, where value-adding activities can be allocated in carefully chosen parts of the world. The idea is that success in an activity is linked to an abundance of factors it uses intensively, meaning that firms can either engage in FDI in another country or import resources. Basic factors include natural resources, climate and geographical locations (LAs), while advanced factors include communications, skilled labour and technological capabilities (OAs). Related and supporting activities Activities are interdependent, meaning that the success of one activity is typically dependent on the competence of related and supporting activities, such as capable and reliable suppliers and distributors that fit well within the industry. Demand conditions Countries tend to achieve international success in those activities for which there is sufficient domestic demand. According to PCM, this is one reason why capital-rich countries are successful in the production of new, technologically-advanced, labour-saving goods. Firm strategy, structure and rivalry The actions of firms play a part in establishing a national competitive advantage. For example, the management culture in a particular country may be more focussed on international expansion. In addition, the presence of strong competition between domestic rivals will tend to improve those firms' prospects of international competitiveness.
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