Academic journal article Management International Review

Porter's Diamond Framework in a Mexican Context

Academic journal article Management International Review

Porter's Diamond Framework in a Mexican Context

Article excerpt

Abstract

* The Porter diamond model has been widely used as a basis for examining international competitive strategies. This article examines the ways in which Mexico is linking itself to the U.S. economy via a double diamond.

* The strategies of Mexico's leading clusters--petrochemicals and automobiles--are considered within the double diamond framework.

Key words

* A double diamond model is already being used by Mexican corporations to both create and sustain economic progress.

Porter Revisited

Porter's "diamond" model is well-known to both researchers and practitioners.

In way of reprise, the model is based on four country-specific determinants and two external variables. These include:

1. Factor conditions such as: (a) the quantity, skills, and cost of personnel; (b) the abundance, quality, accessibility, and cost of the nation's physical resources; (c) the nation's stock of knowledge resources; (d) the amount and cost of capital resources that are available to finance industry: and (e) the type, quality, and user cost of the nation's infrastructure.

2. Demand conditions such as: (a) the composition of demand in the home market: (b) the size and growth rate of the home demand; and (c) the mechanisms through which domestic demand is internationalized and pulls a nation's products and services abroad.

3. Related and supporting industries such as: (a) the presence of internationally competitive supplier industries that create advantages in downstream industries through efficient, early, or rapid access to cost-effective inputs; and (b) internationally competitive related industries which can coordinate and share activities in the value chain when competing or those which involve products that are complementary.

4. Firm strategy, structure, and rivalry such as: (a) the ways in which firms are managed and choose to compete; (b) the goals that companies seek to attain as well as the motivations of their employees and managers; and (c) the amount of domestic rivalry and the creation and persistence of competitive advantage in the respective industry.

The two outside forces, also affecting the competitiveness of a nation, but not direct determinants, are these:

1. The role of chance as caused by developments such as: (a) new inventions; (b)

political decisions by foreign governments; (c) wars; (d) significant shifts in world financial markets or exchange rates; (e) discontinuities in input costs such as oil shocks; (f) surges in world or regional demand; and (g) major technological breakthroughs.

2. The various roles of government including: (a) subsidies; (b) education policies; (c) actions toward capital markets; (d) the establishment of local product standards and regulations; (e) the purchase of goods and services; (f) tax laws; and (g) antitrust regulation (Porter, pp. 69-130).

Figure 1 provides an illustration of the complete system of these determinants and external variables. As can be seen, each determinant affects the others and all, in turn, are affected by the role of chance and government.

[FIGURE 1 OMITTED]

Critique and Evaluation of the Porter Model

In applying Porter's model to international business strategy, it is important to realize eight key facts. First, the government is of critical importance in influencing a home nation's competitive advantage. For example, it can use tariffs as a direct entry barrier to penalize foreign firms, and it can employ subsidies as an indirect vehicle for penalizing foreign-based firms. However, the problem with government actions such as these is that they can backfire and end up creating a "sheltered" domestic industry that is unable to compete in the worldwide market (Rugman and Verbeke 1990).

Second, while chance is a critical influencing factor in international business strategy, it is extremely difficult to predict and guard against. …

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