GLOBAL POLICY

Global Policy & Strategy

Global Policy & Strategy

Michael Porter's Diamond Model

Factor Conditions

Factor conditions are considerably complicated in the present scenario since government regulations on organizations functioning in this industry are becoming increasingly stringent (Husayan, 2005, pp. 61-98). For instance, firms that would previously create a competitive advantage through the utilization of cheap skilled workforce now have to face a more resilient workforce that demands a remuneration structure that weighs down heavily upon resources (Zahra, Shaker, Ireland and Michael, 2000, pp. 925-50). The availability of raw materials is experiencing a near-global decline, leading regulatory bodies to clamp down on firms that show evidence of under-utilizing raw material.

Wal-Mart has been known to place an extensive degree of pressure on its workforce in the past. However, a brief review of Wal-Mart related press releases is sufficient to prove that this strategy will no longer be viable in the future. In addition, Wal-Mart chooses to outsource most production operations in order to take advantage of economies of scale (Jerry and Leibtag, 2005). As the economies of scale continue to diminish, the positive influence of outsourcing production operations continues to diminish in tow.

Demand Conditions

Demand conditions are considerably favorable in this industry. Consumers rely on locally produced goods on a daily basis while imported goods are seldom sought after. Another reason behind the favorable demand conditions is that the local market has managed to supply quality products to consumers with consistency (Zahra, Shaker, Ireland and Michael, 2000, pp. 925-50). This has contributed significantly to the development of consumer confidence in locally produced goods.

Wal-Mart's demand conditions continue to remain at an all time high because the product mix that Wal-Mart utilizes caters to the equally mixed nature of modern day consumer demand (Mitra, Debanjan and Peter, 2002, pp. 350-65). Wal-Mart imports products that are in demand (for which consumers are willing to pay an additional premium) while simultaneously giving consumers a cost-cutting advantage on locally produced goods that are of a more regular nature; such as Fast-moving Consumer Goods. Wal-Mart possesses a very strong position in the competitive market place but still it may face problems due to mature market industry of Sri Lanka (Nirmalya and Benedict, 2007). The main focus of the competition is price and in order to maintain its competitive position, it will be forced to cut costs.

Related and Supporting Industries

The size of the organization makes it complicated for forward or reverse integration to be considered an option. As a result, the organization continues to rely on related and supporting industries (Naveen and Tice, 2000, pp. 749-79). This gives related and supporting industries a significant and consistent supply of business that they utilize to develop and expand with the passage of time. In essence, the related and supporting industries take direct influence from the positive/negative trends that the organization experiences.

Wal-Mart's operations are expansive and diverse. As a result, it functions in coordination with a large number of related and Supporting Industries (Zahra, Shaker, Ireland and Michael, 2000, pp. 925-50). Wal-Mart offers a wide range of ...