Firm Strategy, Structure,
& Rivalry
The Diamond Model
Every business operates within a playing field—the environment where it is born and where it learns to compete. The diamond is a model for identifying multiple dimensions of microeconomic competitiveness in nations, states, or other locations, and understanding how they interact.
By identifying and improving elements in the diamond that are barriers to productivity, locations can improve competitiveness.
Key Concepts
The CENTRAL ROLE of Business
Businesses create jobs and wealth, not governments.The Business Environment
Understanding the way the elements in the business environment fit together and interact is critical for improving productivity.HOW Locations COMPETE
Locations compete to offer the most productive environment for business.Quality of the Business Environment
Factor (Input) Conditions
Demand
Conditions
Conditions
Related &
Supporting Industries
Supporting Industries
Many things matter for competitiveness.
Successful economic development is a process of successive upgrading, in which the business environment improves to enable increasingly sophisticated
ways of competing.
This environment is embodied in four broad areas as captured in the diamond
model.
The nature of home-market demand for the industry’s product or service.
The location’s position in factors of production, such as skilled labor or
infrastructure, necessary to compete in a given industry.
The conditions governing how companies are created, organized, and managed,
as well as the nature of domestic rivalry.
The presence or absence of supplier industries and other related industries
that are internationally competitive.
Many things matter for competitiveness.
Successful economic development is a process of successive upgrading, in which
the business environment improves to enable increasingly sophisticated ways of competing.
