Japans Car Industry

The Car Industry in Japan

MBA 539

Phillip DeGrandis

Porter’s Diamond model is to explain why a nation achieves international success in a particular industry. Porter theorizes identified four broad attributes as constituting the diamond which are Factor endowments, Demand conditions, Relating and supporting industries, Firm strategy, Structure, and rivalry. These attributes can promote or impede the creation of competitive advantage.

Factor Endowments

Factor endowments refers to a nation’s position in factors of production necessary to compete in a given industry. It can lead to competitive advantage. Factor endowments distinguishing between basic factors (natural resources, climate, location, and demographics) and advanced factors (communication infrastructure, sophisticated and skilled labor, research facilities, and technological know-how). Japan as a nation has invested a lot in technologies for car production and development. This has given them a superior edge in the exportation of their cars worldwide. Also, they have a highly skilled workforce. Japanese workers have a connection to one another and they are working together for one common goal rather than American companies just working for themselves and profits (Aoki, 2011).

Demand Conditions

Demand conditions refers to nature of home demand for the industry’s product or service. The nature of home demand for the industry’s product or service influences the development of capabilities. Porter emphasizes the role home demand plays in upgrading competitive advantage. If the domestic consumers are sophisticated and demanding, it creates pressure to local firms to meet high standard of product quality and to produce innovation products (Hill, 2013). The Japanese are relatively wealthy so large expenditures on automobiles seem like a good plan. Through their factor endowments both basic and advanced, Japan has really set and led the market for the better part of 20 years. They make advancements...