Porter's Diamond of National Advantage

What it does:
Offers a way to visualize and understand how countries establish climates where businesses thrive.

Its other names:
The Diamond Model, Porter's Diamond of National Competition.

Where it comes from:
The writings of Harvard economist Michael E. Porter, especially the 1990 book The Competitive Advantage of Nations (Free Press).

Summary:
The points on Porter's Diamond represent the four factors in a nation that make its businesses competitive:

1. Factor Conditions -- On the plus side, technologies and a skilled workforce are available. On the negative side, there is a ack of natural resources or skilled employees.
2. Demand Conditions -- Demand for a product can shape production in many ways. For example, a company that makes brooms and easily sells them all in its own country probably enjoys a competitive advantage over foreign broom-makers who want to sell there.
3. Related and Supporting Industries -- The presence of capable suppliers can enable a company to excel, for example.
4. Firm Strategy Structure and Rivalry -- Direct competition spurs a company to increase production, market aggressively and take other steps to remain competitive. On the negative side, the presence of too many competing firms can create an unforgiving climate in certain industries.

What else you need to know:
The factors plotted on Porter's Diamond are not unchanging. An enlightened company can train employees, for example, to overcome the problems of doing business in a country where skilled workers are scarce. Governments can also take an active role in providing competitive advantages for companies by implementing tariffs or other means.