Diamond Of National Advantage Marketing Assignment (Essay Sample)

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Diamond of national advantage:
A country cannot become successful without a clear strategy and direction. A nation might be very hardworking but if its energies are not concentrated in the right direction and are scattered here and there or are focused on the wrong direction then nothing positive could be gained from this hard work. That is why it is said that working smartly is as important as working hardly. A question arises here that how could a country know whether its efforts are being concentrated on the right things or not. The answer to this question lies in the diamond of national advantage model given by Porter in 1990s. He said that a comprehensive study of four factors could help in making a clear strategy and deciding the direction of the concentration of efforts by a country. Additionally, this model could only be used by countries and not by companies. The four factors about which he talked in diamond of national advantage are factor conditions, demand conditions, related and supporting industries and firm strategy, structure and rivalry. These factors pinpoint the industry that has the capability and potential to get competitive edge for the country.
Competitive industry of Kingdom of Saudi Arabia:
Whenever the name of oil industry is taken, the first country that comes in anyone’s mind is Kingdom of Saudi Arabia. Similarly, whenever one talks about Kingdom of Saudi Arabia, he could not get the image of high building and loads of wealth generated by the Kingdom from its oil industry. Thus, these two go hand in hand. The Kingdom has a competitive advantage in its oil industry, but drops in oil price for about an era has effected every factor on the diamond of national advantage and has negatively affected the progress of the economy CITATION Car15 \l 1033 (Difiglio, 2015).
Factor conditions:
If factor conditions is defined in the most basic way, then it could be said that these are the inputs to the industry. There are four main inputs that we always study at the basic level. These are land, labor, capital and infrastructure. In case of the Kingdom, land could be equated with the huge amounts of natural reserves found under the desert’s soil. Although different estimates exist about the potential natural reserves of oil in the Kingdom, but it has maintained its position as the biggest producer for many eras. These natural reserves are not affected by the drop in prices, but talks are being done about the production cuts or production caps which will affect the exploration, production and sale of these reserves. The second basic factor i.e. labor also get disturbed by these price drops. A lot of people in the Kingdom of Saudi Arabia are working for the public sector but due to decrease in budgets and cuts in different government projects, freezing of new hiring has been done at many places which has a direct impact on the fresh graduates. Additionally, people working with the oil companies or in supporting industries are stressed about their job safety due to these price drops. The third basic input i.e. capital has stopped coming in the oil industry because of negative trends and analysis reports by experts who think that that future of oil industry does not seem that bright right now and for the coming few years at the least. This situation has also increased the borrowing rate and decrease in the ratings of Kingdom by Standard & Poor. Finally, the last basic input i.e. infrastructure is not being developed anymore due to high deficits in the budget of Kingdom’s government as she was entirely dependent upon oil reserves.
Demand conditions
If demand conditions are defined in the most basic way, then it could be said that demand is the market trends about the customers. Currently, customers are delighted from the drops in oil prices as they are saving up a lot of money that was previously spent by them on the oil required for their daily needs. Drop in oil prices has also decreased prices of some other commodities and services such as energy and transport etc. As customers are happy on one hand, the Kingdom of Saudi Arabia is losing its biggest importers in light of the new dynamics of the oil industry. United States of America was one of the biggest oil importers of the Kingdom but they are now doing exploration for their own shale gas. In the past few years, the shale gas projects were estimated to see a boom but the current reports along with the views coming from analysts show that these dropped prices of oil are actually helping Kingdom of Saudi Arabia to drive its competitors out of the market i.e. it is becoming extremely difficult for United States of America to continue competing with oil at the level of prices that have become the new norm of the oil industry in this era. Similarly, United Kingdom’s oil industries in the North Sea are also having troubles to compete with oil prices CITATION EdC \l 1033 (Conway, n.d.). The Kingdom is however gaining attention from some new members or developing countries such as India which is a good news for the dwindling oil industry CITATION Kab15 \l 1033 (Taneja, 2015).
Related and supporting industries
If related and supporting industries are defined in the most basic way, then it could be said that they are the industries that provide sustenance to the functions of oil industry. Due to dropped oil prices, the related and supporting industries of the Kingdom are also reporting losses in their income. These industries are the second hardest hit industries after the oil industry due to these drops in prices.
Firm strategy, structure and rivalry
The companies in the oil industry of Kingdom of Saudi Arabia are arranged in a way that the government maintains most of their control through centralizing the decision making mechanisms. Additionally, the government backed Saudi Aramco is the biggest oil producer in the Kingdom. This shows that the government of Kingdom has deliberately and intentionally created a monopoly to advance its own benefits. The local competition is not strong in the oil industry of the Kingdom of Saudi Arabia. But constant drops in oil ...