Business论文模板 – Report on Ports Diamond

Introduction

The final products of citrus companies of Brazil contribute significantly to the total amount of global orange juice output. Brazil commands a great portion of world trade dealing with orange juice. Besides, Brazil is the primary supplier to the European Union market. More so, the EU is one of the major markets that constitute a great portion of the world consumption (Spreen, Barber, Brown, Hodges, Malugen, Mulkey & Rouse 2006, p. 14).

The world supremacy by Sao Paulo-based industry is in danger. The Brazilian company based in Sao Paulo is undergoing epidemic of a dangerous disease called citrus canker as well as citrus greening. These infections result in immature fruit drop hence making the fruit inappropriate for the market (Christiano, Dalla Pria, Junior, Parra, Amorim & Bergamin Filho 2007, p. 60). Citrus greening in particular results to high rates of drying of fruit trees (Sterns & Spreen 2010, p. 167).

The industry’s capacity to react to these epidemics will finally dictate its comparative competitiveness. This action is appropriate in case the industry prefers to maintain the status of the major supplier of citrus products for the years to come (Ndou & Obi 2013, p. 163). In this report “Porter’s Diamond” is applicable as a model to explain the competitive advantage of internationally competitive industry in Brazil. This industry processes orange fruit into juice. This paper further expounds on this theme by comparing Brazilian industry and U.S based industry while providing the role of government in regulation of industry’s competitive ability. The paper concludes by providing the criticism of Porter’s approach.

Porter’s Diamond

Michael developed the idea of Porter’s Diamond in the year 1990. Porter claims that competitive advantage developed from and maintained by a substantially localized procedures (Márkus 2008, p. 151). Porter further notes that variations in nation’s economic structures, norms, cultures as well as institution influence its competitiveness. Additionally, the conventional concepts of resource endowments, as well as factor costs, affect competitiveness (Sterns & Spreen 2010, p. 169).  The four determinants covered in the diamond model include factor conditions. Secondly there is demand condition. Thirdly, there is firm structure and approach. Lastly, it is the affiliated and auxiliary industries (Jin & Moon 2006, p. 200). The chance that involves innovation and the culture of entrepreneurship with the government are supportive factors that affect the four determinants of the model. Porter as well refutes the conventional idea of industry policy, contending that competitiveness is enhanced by area specific domination of companies dealing with similar activities (Sterns & Spreen 2010, p. 169).

In using his diamond model, Michael concentrates on firm’s potential to improve, to become creative as well as grow. He also focuses on entire aspects linked to a company’s capacity to develop and exploit more international market share. Incorporated within the Porter’s model is a fundamental assumption that growth, as well as comparative productivity, will dictate a firm’s long-run sustainability. However, the idea of ability to react to problems is not present in the analysis. Although Porter straightly recognizes the fact that change is inevitable, this transformation is performed mainly as an active continuation of improvement, creativity as well as growth. The likelihood of an aggressive, likely demoralizing activity that is tangential to markets and rivalry is not a kind of transformation that is explicitly addressed. Entire industries, but especially those in agricultural sectors, are accessible to these forms of dangerous events. In an agricultural context, this accessibility is an unavoidable outcome of the nature of crop as well as livestock activities. In this connection, there are four determinants that lead to comparative advantage (Sterns & Spreen 2010, p. 169).

Determinants of Advantage

Factor Conditions

The most considerable and viable competitive advantage develops where the particular and advanced elements required to compete in a given industry are available. Primary factors are simple to copy and hardly cause competitive advantage. However, they can also be developed in reaction to specific intrinsic shortcomings. These challenges can lead to competitive success for motivating companies to innovate (Cho, Moon & Kim 2009, p. 90). Traditionally, the citrus fruits firms in both countries profited from their country’s endowments of essential factors such as availability of enough land as well as suitable growing environmental conditions. These companies as well developed in manners derived based on the comparative advantages manifested in these primary factors; this process happens to establish advanced elements to maintain their inherent competitive advantages in the economy. In Brazil, the factors entail experience in exporting and encompassing the logistics related to shipping orange juice. Lastly, there is also the operation of global trade as well as exchange rate uncertainty (Sterns & Spreen 2010, p. 170).

As Sao Paulo endeavors to thrive in the global market, it will have competitive advantage diminished due to dangers facing primary factor conditions. Furthermore, Sao Paulo is among the main sugarcane growing areas in Brazil. Costly Crude oil prices also feature it. Currently, Brazil intends to enlarge its present well performing ethanol from sugarcane activity. Since sugarcane is a product with minimal production risks contrary to citrus, a significant portion of land is being channeled from growing citrus towards sugarcane farming (Sterns & Spreen 2010, p. 170).

Demand Conditions

The form of local demand is the primary factor affecting the manner in which firms perceive as well as react to customer’s needs. International success is possible in case the domestic section is more developed compared to the rest of the nations (Asmussen, Pedersen & Dhanaraj, pp. 43-46).  In this situation, local demand offers firms with a clear image of emerging customer desires. Nearly none of the finished orange juice in Brazil is sold locally. This sector is fully relying on export markets (Sterns & Spreen 2010, p. 170).

Affiliated and Supporting Industries

These represent firms that share same technologies, raw materials, distribution channels, potential buyers or offer products that are corresponding. Internationally best-affiliated firms can provide techniques, information on probable rivals and ideas that can contribute to global competition (Zhao, Zhang & Zuo 2011, pp. 4965-4970). Correspondingly, supporting firms always give the most affordable and quality ingredients in an efficient and at times preferential manner. The benefit brought about by intimate working affiliations is very essential. Producers and consumers situated close to each other can utilize the opportunity availed by narrow lines of communication. These communication lines offer fast and consistent passage of information in the midst of progressive exchange of thoughts and creative abilities. Sao Paulo firms profit from enlarged networks of associated industries and events.

According to Sterns and Spreen (2010, p. 170) the growth of the industry gave way to a higher concentration on bulk production in the relevant industries. Economies of scale enabled more dependence on vertical integration as well as less dependence on exterior networks of material distributors and downstream firms. The starting of the orange company in Sao Paulo in the year 1962 was due to the deterioration of environmental conditions in Florida. Specifically, the founding of Brazilian industry was because of the effect of winter freeze that occurred in Florida. This winter freeze ruined significant part of Florida’s harvest manifested by drying of many citrus trees. Due to this, a dominant grower processor entered into a partnership with a Brazilian industry. Sao Paulo was suitable for this opportunity. This collaboration led to the considerable growth of Brazilian industry since the rest of firms commenced venturing in Sao Paulo activities. Over this period, development in technologies, especially with aseptic volume storage capacity, promoted the building of an enlarged group of Sao Paulo-based industries exhibiting high potential for bulk storage as well as bulk transportation.

Firm Structure as well as Strategies

Brazilian social norms as well as attitudes in relation to corporate sector affect the manner in which companies operate and organized. This trend always occurs in presence of government policy. The prevailing conditions and mainly the socio-political environment appear to exhibit a different effect on the nature of firms where Brazil obtains preeminence globally. Countries will likely thrive in industries where the approaches, structures, as well as customs preferred by the national surrounding, are appropriate to competition in the firm (Sterns and Spreen, 2010, p. 171).

Furthermore, the kind of rivalry and local competition has an essential effect on the global competitiveness of Brazilian companies. Brazilian competitors avail a strong impetus to the development and continuity of competitive advantage. Local competition involuntarily eliminates any standard benefits associated with being in the local country and compels firms to go beyond such fundamental advantages to developing more sustainable rewards (Sterns and Spreen, 2010, p. 171).

In this context, two explicit distinctions are present. Firstly, it is the level of vertical integration. Based on Brazilian industry, entire huge citrus firms are backward vertically integrated hence commanding the ownership of vast portions of citrus groves. The shareholding structure is very distinct. There are extensive processors owned farms that have a wealth of experience. Besides, there are industries that do not possess processing assets. They have long run other well-endowed processors at constant rates (Sterns and Spreen 2010, p. 171).

Role Played by Government and by Chance

In Sao Paulo, there is little government involvement in the industry. The industry individually funds a company called Fundecitrus that carries out primary research dealing with orange tree production. Data concerning the production, price, use as well as production cost are typically absent in Sao Paulo. The Brazilian government often supports labor legislations and needs considerable non-wage expenses for citrus employees. Still in Brazil, there are legislations linked to the surrounding that regulate the portion of land which can be useful for production of citrus fruits. In contrast to Florida, there is minimal urban sprawl manifested in Sao Paulo. This model of living probably originates from a strategy of costly energy as well as automobiles. Besides, there is stringent monitoring of farmland to urban use (Sterns & Spreen 2010, p. 171).

Criticism of Porter’s Approach

Critics claim that the domestic diamond concentration of Porter fails to consider the qualities of domestic nation’s major trading partner (Rugman & Anderson 2013, p. 6). This approach is irrelevant in many of the little global countries (Abadie, Diamond & Hainmueller 2015, p. 498). The model also ignores the contribution of multinational companies towards the competitive ability of countries such as Brazil. In this scenario, Porter’s model has focused on Brazilian company and U.S citrus industries alone while ignoring other worldly affiliated companies (Smit 2010, p. 119). Smit (2010, p. 119) proposes an expansion of Porter’s model to incorporate the aspects of the major trading partners based in the domestic nations. In the limited application of double diamond strategy, Porter shows that competitiveness relies on both internal as well as external diamonds (Rugman, Oh & Lim, 2012, p. 220).

Industrial Development Phases

Another set of a statement concerning Porter’s competitive advantage relates to diamond analysis. Specifically, Porter claims that nations transform through many developmental aspects. In every stage, the comparative significance of each part of the diamond changes in a similar manner with respect to industry’s competitiveness. Based on the level of development, these stages are factor driven, investment driven, innovation-driven as well as wealth driven phases. Porter argues that it is through the innovation driven phase alone that the complete effect of the four determinants of the diamond model seems achievable. In the same stage, viable competitive advantage can be realized (Martin 2006, p. 159).

Conclusion

Disease epidemic will compel Sao Paulo industry to search for alternative and innovative ways to solve basic factor endowments and transform these primary factors into latest and innovatively developed factor endowments. More so, Sao Paulo will have to assess both the contemporary firm approaches and prevailing government policies. The probability that either Brazilian or the U.S will fully leave its traditional market shares is slim. The rationale for this occurrence is that none of the firms seem ready to dissociate entirely from previous ventures. Therefore, the two industries will most probably establish strategies aimed at maintaining their superiority in the market.

List of References

Abadie, A, Diamond, A & Hainmueller, J 2015, ‘Comparative politics and the synthetic control method’, American Journal of Political Science, vol. 59 no.2, pp. 495-510.

Asmussen, CG, Pedersen, T & Dhanaraj, C 2009, ‘Host-country environment and subsidiary competence: Extending the diamond network model’, Journal of International Business Studies, Vol. 40 no.1, pp. 42-57.

Cho, DS, Moon, HC & Kim, MY 2009, ’Does one size fit all ? A dual double diamond approach to country-specific advantages’, Asian Business & Management, vol. 8 no.1, pp. 83-102.

Christiano, R, SC Dalla Pria, M, Junior, WJ, Parra, J, RP, Amorim, L & Bergamin Filho, A 2007, ‘Effect of citrus leaf-miner damage, mechanical damage and inoculum concentration on severity of symptoms of Asiatic citrus canker in Tahiti lime. Crop Protection’, vol. 26 no.2, pp. 59-65.

Jin, B & Moon, HC 2006, ‘The diamond approach to the competitiveness of Korea’s apparel industry: Michael Porter and beyond’, Journal of Fashion Marketing and Management: An International Journal, vol. 10 no.2, pp.195-208.

Márkus, G 2008, ‘Measuring company level competitiveness in Porter‘s Diamond model framework’, In FIKUSZ 2008 Business Sciences-Symposium for Young Researchers: Proceedings, pp. 149-158.

Martin, R 2006, ‘13 Economic geography and the new discourse of regional competitiveness’, Sharmistha Bagchi-Sen is a Professor in the Department of Geography, University at Buffalo-State University of New York. Helen Lawton Smith is Reader in Management, School of Management and Organisational Psychology, Birkbeck, London University and a Distinguished Research Associate at the School of Geography, Oxford University, p. 159.

Ndou, P & Obi, A 2013, ‘An analysis of the competitiveness of the South African citrus industry using the Constant Market Share and Porter’s diamond model approaches’, International Journal of Agricultural Management, vol. 2 no.3, pp.160-169.

Porter, ME 2008, ‘Competitive advantage: Creating and sustaining superior performance’, New York: Simon and Schuster.   

Rugman, A & Anderson, AD 2013, ‘Administered Protection in America (Routledge Revivals)’, London:  Routledge.

Rugman, AM, Oh, CH & Lim, DS 2012 ‘The regional and global competitiveness of multinational firms’, Journal of the Academy of Marketing Science, vol.40 no.2, pp. 218-235.

Smit, AJ 2010, ‘The competitive advantage of nations: is Porter’s Diamond Framework a new theory that explains the international competitiveness of countries?’ Southern African Business Review, vol.14 no.1, pp.105-130.

Spreen, TH, Barber, RE, Brown, MG, Hodges, AW, Malugen, JC, Mulkey, WD & Rouse, RE 2006, ‘An economic assessment of the future prospects for the Florida Citrus Industry’, Presentation to the Special Industry Task Force, Florida Department of Citrus, Lakeland, FL.

Sterns, JA & Spreen, TH 2010, ‘Evaluating sustainable competitive advantages in Brazilian and US processed citrus supply chains: an application of porter’s diamond framework’, International Journal on Food System Dynamics, vol. 1 no. 2, pp. 167-175.

Zhao, ZY, Zhang, SY & Zuo, J 2011, ‘A critical analysis of the photovoltaic power industry in China–From diamond model to gear model’, Renewable and Sustainable Energy Reviews, vol.15 no.9, pp. 4963-4971.

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