Analysis Of Porters Diamond Framework For India

Published by MBA Skool Team, Published on January 23, 2014

“Meet the pissed off American programmer… He’s the guy – launching websites like and He is the guy telling tales – many of them true, a few of them urban legends - about American programmers being forced to train Indian replacements”

Article in Wired magazine, February 2004

Image Courtesy:, posterize

The above article is a testimony to how the world is waking up to take notice of India. India and the Indians have arrived on the global scenario and is offering a competitive advantage over its peers.

When India regained its independence in 1947, the country’s political, social, and economic fate was in its own hands for the first time in 90 years. With optimism, the country embarked on a journey to establish a democracy and representative government and build a society within which it’s large, diverse, and fragmented population could prosper.

Let us analyze India through these 6 dimensions:

1. Factor Conditions:

In the last two decades, the depressing vision of India’s population as an ‘overwhelming burden’ has been turned on its head. India now views its population of 1.2 billion as a vast source of Human capital.

India is a leading producer of many mineral resources and has a vast reserves of coal. Its lack of oil and natural gas supplies has put a lot of dependency on imports.

India has all the ingredients of a knowledge-based economy by virtue of English language and human resources.

India is suffering a huge setback because of its poor infrastructure which needs a lot of attention going forward, to attract investments.

2. Demand conditions:

The more demanding the customers in economy, the greater the pressure facing nation to constantly upgrade its competitiveness via innovation and improving its quality.

India attracted over 250 multinationals to set research centers. The economy is the world’s 12th-largest. As the educated middle class continues to rise and becomes more and more powerful, the country would demand more and more and their consumptions will increase. Going forward, the demand conditions are going to rise which may lead to better quality of education for the masses, better governance, less corruption and greater equality. This will only increase the GDP and leads to improvements in its innovation and services.

3. Related and supporting industries:

Services form the largest part of Indian GDP. One of the biggest advantages that India has is its IT industry. It is a world leading provider of IT services and also employs a vast majority of people. According to a Goldman Sachs report, India has the potential to show the fastest growth over the next 30 – 50 years.

India clearly has low cost high quality labor compared to any other country in the world and it will have a young workforce till 2050. But still it hasn’t made any progress in the field of manufacturing. Although it is the world’s cheapest producer of high quality steel, policy paralysis and corruption has halted the India from becoming the world’s leading manufacturer.

4. Firm Strategy, structure and rivalry:

Indian IT industry has been the toast mainly because of its low cost innovation. The pharmaceutical industry in India is seen in a very positive light as India is the leading producer of generic drugs. Thus the firm strategy in India has remained low cost high quality production.

India has moved on from being a socialist country towards a capitalist economy. There is an open market economics for most of the goods and services produced here. Thus this healthy rivalry among the peers in their industry have made the firms to be more innovative and effective in their offerings.

5. Government:

Post the 1991 reforms, Indian economy shaped up pretty well and government have created many policies to better its competitive advantages. Right to education, RTI, employment guarantee act have served to the benefit of the masses. With food security bill, Identification cards and Direct benefit transfer programs shaping up, the government involvement looks promising. The only downside is the corruption and implementation incompetence.

6. Chances:

With a deeply rooted democracy, demographic dividend, self-sufficiency in many resources and an ambition to become a super power, India’s chances are better than any time in its history.

This article has been authored by Preetam Gupta from IIM Indore

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