Essay Example on A Porter's Diamond is used Worldwide








Porter's Diamond for Volkswagen A Porter's Diamond is used worldwide which studies why some countries are better than others in certain industries Michael Porter presented the diamond which showed different factors why some countries are at an advantage Porter 1990 Porter's diamond is shown below which signifies the elements that are seen as the influential aspects of national comparative economic advantage In this section a Porter's diamond analysis has been conducted on Volkswagen and their scandal which started in September 2015 BBC News 2015 One of the concepts of the model is factor conditions which refers to the resources available in the country Mulder 2016 This would include resources such as the factors of production which includes land labour capital and enterprise Simple natural resources include climate minerals and oil as the flexibility of the factor is low within these This is because although they set a basis for international competitiveness they are unlikely to produce anything into actual value creation without the advanced factors Rugman and Collinson 2012 Advanced factors are usually specific to the market but include aspects such as research skills and scientific-technical or market knowledge Rugman Collinson 2012 p 303

In the Porter's diamond the advanced factors are most noteworthy for competitive advantage These are usually the result of investment made by businesses and government as they aim to provide research training and innovation For a business to improve the competitive advantage the company should invest in its factor conditions on a consistent basis as they would reduce costs in the long run The factor conditions which affect and determine Volkswagen and their success include aspects of skilled workers due to the government's emphasis on training and research and development LinkedIn 2016 This is because there are a number of universities which pay attention to scientific research therefore are able to develop a successful car manufacturing industry The German government has a positive impact for the economy as they are able to create a competitive advantage because the companies within the car industry such as Volkswagen are able to use the sponsored scientific research and gain a larger market share as they are competing at an international level The Volkswagen scandal which took place in 2015 ultimately lead to losing the competitive advantage it had against the other companies This is because they had to pay 6 7billion to reimburse for the scandal leaving it with a 2 52bn pre tax loss BBC News 2015

This meant they could not spend on new designs technology and research and development which lead to a decrease in market share Volkswagen s scandal meant the European car market had a negative impact as the company saw a decrease in consumers after the emissions scandal which lead to a decrease in overall sales Golson 2015 As Volkswagen had a significant market share they are able to use the factor conditions that made them competitive internationally and utilise the research conducted by the government and universities into scientific and technical investigations LinkedIn 2016 In order for Volkswagen to gain the market share they previously had they would use their factor advantage and either use emission control systems that actually control emission and start producing electric cars Golson 2015 Also demand conditions are an element of the model which looks at aspects such as the size of demand and the growth and complexity of the market Mulder 2016 This means for a business to grow and invest in new and better products they have to ensure use of the high demand If there is high demand in the home country of the company then it is able to work at an advantage especially when it competes internationally The company will want to increase their market share hence have to compete internationally as they are at best when there is high demand as it encourages them to develop their products

Also when the business competes domestically the amount of market shares the company holds would force them to do well as there is a high amount of pressure which is needed to prepare for good performances in other nations where they do not have a considerable amount of the market share The demand for market is vital for any business as the product s ultimate design reflects the home market needs Porter 1990 This ultimately leads to determining the industry as the similar strategy responds to international markets Volkswagen is a part of the German car industry which is Europe's biggest automotive industry in production and sales of cars Germany holds onto the largest number of original equipment manufacturer plants which is when the vehicle s components or car parts are identical to the parts used in producing a vehicle Ruppert 2011 Volkswagen is able to have an advantage in the demand factors as the company focuses on recognising customer demands and meeting their needs Volkswagen is able to compete internationally as the demand and supply are proportional therefore are able to grow in the market This is because when the demand increases for Volkswagen the price and supply increases which ultimately leads to competition between car corporations BBC News 2015

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