Poster’s Diamond Theory Of National Advantage (Essay Sample)

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Poster’s Diamond Theory of National Advantage
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Introduction
Global competitiveness is a mainstream subject for scholars today, with a significant number of research studies and experiments aimed at identifying factors which place an institution or country at an advantage over the others. Porter’s diamond model is one of these theories, as it analyzes competitiveness based on the four dimensions of demand conditions, strategy structure of the institution and the rivalry. The theory faces factor conditions, and the supporting industries. In his theory, Porter described factor conditions as the production inputs and technology required for competition. Demand conditions, another significant determiner of competitiveness, refers to the demand for a product or service in the industry or local environment.
Related and supportive industries in this theory explore the role of suppliers and distributors in the demand and supply chain (Porter and Stern 2001). Firm strategy, structure, and rivalry also constitute critical aspects as they stand for the design in which the firm is created, managed and developed, while exposed to the dynamic conditions of the industry. The extended form of the theory also incorporates two additional factors: government, and chance. The two additions have significant influences on the productivity of a firm. The research analyzes Ford Motors using Porter’s diamond theory of national advantage.
Ford Motor Company was founded by Henry Ford and eleven other investors in 1903. By 1919, as the business expanded, internal conflicts motivated Henry Ford and his son Edsel Ford to buy the shares of the company to become the sole owners and thus the principle decision makers. The Model T design, introduced by the firm, marked an innovative solution in car assembly, providing cheaper and more reliable interchangeable parts. Throughout the 20th century, the company enjoyed periods of sustained financial track record, one culminated by a record 5.7 billion dollar loss suffered in 1992 (Barber and Darrough, 1996). In 2001, the company incurred another huge loss, one it never quite recovered from, a loss attributed to a failure of the Ford 2000 initiative. During this period, the company lost a significant portion of the market share, but their innovative strategies ensured the business survived.
Today, ford is still recognized as one of the major players in the automobile industry, developing major brands such as Jaguar and Land Rover, which were sold to Tata Motors in 2008. Massive changes were made to the organization’s culture, reducing the family line succession procedures in favor of the appointment of more qualified personnel to lead the company. For example, Mark Fields is the current CEO of Ford Motors, even though he is not a direct descendant of the Ford family (Bayouand De Korvin 2008).
The twenty first century presented major problems to Ford Auto Company because of the major shifts in the auto industry in Europe and abroad. One of these changes which affected Ford just like other players in the market is the pressure of cost recovery and intense competition in the industry, making the manufacturers to seek economies of scale, mainly through an increase in production volumes and other non-core activities (Bailey, Kobayashi, and MacNeill, 2008). The constant developments placed intense pressures on due to underutilization in Western Europe and the developing markets, and rise of costs to maintain the systems. A collapse of industries thus started at this period, when cost sharing production methods between companies failed and threatened to dilute brand authenticity like in Jaguar’s X-typed model ad Ford Mondeo. These are the problems which made Ford record a huge loss of over 12 billion dollars in 2006, and consequently its intention to sell the Land Rover and Jaguar brands, which were acquired by Indian firm Tata (Bailey, Kobayashi, and MacNeill, 2008). A sale of two of its luxury brands made Ford attain breakeven eliminating concerns of another downfall by the company or prolonged struggles witnessed in previous financial year losses.
Despite of the many obstacles Ford has faced since inception, it still continues to provide high quality products today, still remaining relevant in the market. An in depth analysis of the state of affairs in the auto industry and the Ford Company can reveal areas of concern where the company needs to focus to improve its competitiveness. The Porter’s model of company and nation’s competitive analysis is the ideal criteria to evaluate the company, with its comprehensive evaluation portfolio focusing on key elements allowing for an understanding of the forces interlay of the industry.
Firm Strategy, Structure, and Rivalry
Porter describes imposed urgency on an organization, one that forces it to be innovative to compete with other firms in local and foreign markets. The overall legislative instruments present in a country influence organizational procedures, controlling how companies are formed, governed, and managed as per the structured legal and statutory frameworks instilled. In developed economies, companies use their core competencies to position their brands in existing and emerging markets. This, therefore, makes the local and global competition an essential factor in the progress of an enterprise and is likely to motivate firms to increase their leverage and sustain their visibility.
In his company, Henry Ford designed a culture whereby unlike other companies, he prioritized competency-building over current sales. For example, it is by following this initiative that the innovation of virtual assembly was introduced, whereby the lines with interchangeable parts were developed in the company’s Michigan plant at Highland Park. The innovation revolutionized the automotive industry, and improved the competitive advantage of the brand, distinguishing its products (Wu, 2004). Through the years, Ford has focused on innovation as a key feature of its culture, to exceed customer expectations through value addition protocols.
Ford Company invested in advanced digital design technology in production to ensure the provision of a vehicle design that seamlessly combines visibility and innovation, and also fits customers’ expectations regarding engine and fuel efficiency, safety, as well as design attributes. Notably, customers are increasingly interested in the social mission of organizations, exploring the elements of corporate social responsibility; therefore, processes such as the establishment of hybrid vehicle models improve the company’s reputation on markets that are concerned about sustainability.
Consequently, the company has strategic functions catering to the development of hybrid and electric cars (Bayouand and De Korvin 2008). This is primarily due to the increasing concerns of environmental degradation as a result of human activities, where emissions from fossil fuels significantly accelerate greenhouse gas emissions to the atmosphere. Success in the electrical and hybrid cars will thus attract new consumers and sustain customer loyalty for the existing customers.
Ford is recognized for manufacturing high-end luxury vehicle models, a majority of which are designed to have impressive design and performance features. However, to differentiate the value provided by the company, changes were made to the type of models that the company prioritizes. Mainly, Ford Company is focused on a fine line of production, turning from its traditional investment in many lines and designs of cars, for instance, by selling Jaguar and Land Rover companies to Tata Motors. By focusing on core competencies, Ford may be able to attain higher levels of success, while reducing the risks associated with scenarios of uncertainty.
Factor Endowment
Factor conditions refer to the inputs and infrastructure necessary for competition. These include the quality of technical and skilled workforce a company has and how they manage them, as well as the costs applied in managing the human capital. A company with a pool of talent and effective leadership can leverage goal realization through a variety of approaches that facilitate flexibility and creativity to provide opportunities for differentiating the products provided, while reducing risks of experimental objectives. Physical resources are also essential in this case and include accessibility to quality and cost-effective resources within the nation or areas of operation such as hydroelectric power, water, and other essential inputs required by a firm (Mel van and Rosen 2009). A company with abundance of these elements thus enjoys a competitive advantage over its rivals.
Capital resource is the workforce of the company and reflect the ability of the firm to identify and recruit relevant personnel to work for them. A firm has to pinpoint the people with skill set relevant to their line of work, and who will be of importance in driving forward the mission of the company. Success in recruitment in turn determine the competitiveness of a corporation in the industry, and the rate at which it can adopt and implement new measures in the production process.
Ford Motor Company has an experienced and knowledgeable human resource management team that guides and manages the social environments within organizations, catering to ethical responsibilities as well as cultural dynamics. The company has a simple yet effective strategy of acquiring, training, and retaining competent and skilled workers who can satisfy the labor and productivity needs of the company. The company has instilled several incentives to influence productivity, such as healthcare and retirement benefits for employees in the various local and foreign regions that the company has established bran...