Question

Explain Porter’s diamond of national competitive advantage and the theory of absolute advantage. Which one do you think is more useful for managers and why?

Answer 1

Porter Diamond model from the above diagram can be observed where according to porter and Nation's competitive advantage is dependent on the four attributes where the nation creates its own factors where the four attributes include

1) Structure and Rivalry

2) Factor Conditions

3) Demand Conditions

4) Supporting Industries

here is factor are related with one another and when you draw this it comes in the shape of a diamond and that is the reason why it is a diamond model and only when all the four factors coordinates together competitive advantage can be arised.

Absolute Advantage - it is one of the earlier theories of International Trade where it is given by Adam Smith and it simply states that the nation who can produce more of a particular good with same resources should export as it is having an absolute advantage in the production

When you compare these two porter's diamond model is most important for managers because it tells all the existing conditions where absolute advantage does not tell about the demand conditions or the rivalry existing where the managers need to analyse the given factors and only through porter's model it can be mentioned and proper decision-making can take place