Traditional economic theories say that there are a lot of factors for comparative advantage of a country such as the land, the location, the natural resources, the labor and the local population size.
In the opinion of Michael E. Porter, a nation can create new advanced factors endowments. It is why, he created a model determining national advantages, he called this model, the "Porter's diamond".
Porter explains by this model how a country or a region can have a competitive advantage over others. He explains us with six variable keys.
His model includes 4 interlinked factors and also 2 other determinants: government and chance, which are represented below.
[...] In fact in 2002, German automobile industry sold more than 10 million of passengers' cars per year in the world whereas the international sales are approximately about 55 millions o passenger cars. That means that Germany holds 18% of the international automobile passenger car market. On the other hand, the market product has known a growth of (L'expansion, 2004). The producers of this market have very different profiles: - There are specialists at big value-added like Volkswagen, BMW, Daimler- Chrysler. [...]
[...] Porter's diamond concerning the German automobile industry Conclusion The story of the automobile market has played an import role in automobile industry. Now there is more competition in the entire world with the new entrants. But the German automobile industry keeps its place in the market (third producer in the world) because their cars are very famous in the entire world and also they are of relatively high value. However we notice that the German automobile industry is competitive because they have a good image and a high quality of its products. [...]
[...] In Germany, the automobile industry is based in Stuttgart in the south of the country (this area is very famous because it's here that firms like Daimler and Porsche were born years ago) (Cities and Stadiums, 2005). With regard to the price of raw materials, Germany is not really strong (fourth place cf. board of keys automobile industry). But it doesn't matter because Germany, builds cars at big added value. It's why German cars are so famous worldwide. But its labor costs are the most expensive in all Europe. [...]
[...] That's what the German automobile industry managed to do and at the same time they managed to begin exporting their products and it was a success abroad as the companies were considering their home demand. In our society and especially in Western Europe, more and more customers want solid and comfortable cars. It's why the consumer is ready to pay, a more expensive product because, he is sure to have quality in return. Now, they try to have more and more electronic gadgets like GPS The products of small cars like the smart; the class A of Mercedes demonstrate that German industry wants to innovate new products for more competitiveness against other European companies like Renault or Peugeot. [...]
[...] In Germany there are four national brands (Mercedes, BMW, Volkswagen and Porsche) but also there are a lot of foreign brands like Peugeot, Toyota, Nissan, Renault, and Opel As the competition is localized in Germany, the automobile industry is always looking for differentiation and makes its best to improve their research-development as well as communication around the brands. That is why, now; we can see that German companies have a strategy of multi-products in order to touch every kind of people (Mercedes with the smart, BMW with the new MINI, Volkswagen with the new beetle They try to change their image with the innovation and it influences a lot of success and this kind of innovation generates competitive advantage. [...]
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