Porter's Diamond ModelThe Competitive Advantage of Nations (Porter's Diamond)A. OverviewB. The diamond - Four determinants of national competitive advantageC. Diamond as SystemD. Implications for governmentsE. ReviewsV. NationsA's competitive advantage. OverviewPorter is a famous business professor at Harvard. He conducted an in-depth study of 10 countries to find out what leads to success. Recently, his company was commissioned to study Canada in a report titled "Canada at the Crossroads." Porter believes that standard classical theories of comparative advantage are inadequate (or even false). According to Porter, a nation gains a competitive advantage if its businesses are competitive. Businesses become competitive through innovation. Innovation may include technical improvements to the product or production process. B. The Diamond – Four Determinants of National Competitive AdvantageFour attributes of a nation constitute Porter's “Diamond” of national advantage. These are: factor conditions (i.e. the nation's position in factors of production, such as skilled labor and infrastructure), demand conditions (i.e. i.e. sophisticated customers in the domestic market), related and supporting industries, and business strategy, structure and rivalry (i.e. business organization conditions) . firms and the nature of national rivalry).Factor ConditionsFactor conditions refer to the inputs used as factors of production – such as labor, land, natural resources, capital and infrastructure. This sounds like standard economic theory, but Porter argues that "key" factors of production (or specialized factors) are created, not inherited. Specialized factors of production are skilled labor, capital and infrastructure. “Non-core” or general purpose factors, such as unskilled labor and mined materials, can be obtained by any company and, therefore, do not generate sustainable competitive advantage . However, specialized factors imply heavy and sustained investments. They are more difficult to duplicate. This leads to a competitive advantage because while other companies cannot easily replicate these factors, they are valuable. Porter argues that a lack of resources often helps countries become competitive (let's call this a selected factor disadvantage). Abundance generates waste and scarcity generates an innovative mindset. These countries are forced to innovate to overcome their scarce resource problem. Is this true? Switzerland was the first country to experience a labor shortage. They abandoned labor-intensive watches and focused on innovative and high-end watches. Japan has high land prices and therefore its factory space is limited. This led to just-in-time inventory techniques (Japanese companies cannot have much inventory). in order to deal with the potential of not having goods on hand when they need them, they have innovated traditional inventory techniques). Sweden has a short construction season and high construction costs. These two elements combined created a need for manufactured homes. Demand conditions According to Porter, a sophisticated domestic market is an important element in producing competitiveness. Businesses facing a sophisticated environment