Porter\'s diamond model has also contributed to theories on clusters, see http:/
ID: 458284 • Letter: P
Question
Porter's diamond model has also contributed to theories on clusters, see http://www.isc.hbs.edu/competitiveness-economic-development/frameworks-and-key-concepts/Pages/clusters.aspx Clusters are groupings of companies that have led to competitive advantages for all. An example of a cluster in the US is aerospace in Washington.The core of clusters is the diamond model and how the different factors in the diamond model are linked together.
How can we 'apply' the diamond model to the aerospace cluster in Washington? Please discuss each of the points of the diamond model in the context of the aerospace industry so that we can get a better understanding of the diamond model. You may also want to check out (explore the website) more information on: http://www.isc.hbs.edu/competitiveness-economic-development/frameworks-and-key-concepts/Pages/the-diamond-model.aspx
Explanation / Answer
Michael Porter introduced the concept of Diamond Model in his book “The Competitive Advantage of Nations” which was published in 1990.
The Diamond Model explains the reasons of specific industries becoming competitive in particular locations. These reasons are a result of following 4 factors, which are discussed with respect to the aerospace industry in Washington:
1. Demand conditions in the home market – There is a huge demand in aerospace industry in Washington as evident from the fact that it is a $ 76 billion industry (as of 2014).
2. Factors of production – Very favourable in Washington with lots of skilled labour available and excellent infrastructure.
3. Firm Strategy, Structure and Rivalry – There are lots of rival firms in Washington, viz., Boeing, Lockheed Martin, Honeywell and others.
4. Presence of related and supporting industries – There are many ancillary companies in Washington manufacturing different aircraft parts.