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Porter’s Diamond
Analysis of Spain (Topic 8)

Manuel Gall
6 Elboden Street
7004 South Hobart mrgatt@postoffice.utas.edu.au Strategic Management
University of Tasmania
Dr. Dallas Hanson

Submitted on October 23, 2012

Introduction: Porter (1990) raised the question: “Why does a nation become home base for successful international competitors in an industry?” According to porter’s diamond, the answer lies in four elements, namely the factor conditions, the demand conditions, the related & supporting industries and in the context for firm strategy and rivalry (Fisher, Hughes, Griffin & Pustay 2009). These four factors interact in a self-reinforcing system that essentially determine a nation’s international competitiveness. This theory can be classified as a hybrid between the classical country-based trade theories[1] that emphasise the country’s factor endowments and the more modern firm-based theories[2] that focus on the action of individual companies (Fisher et al 2006).
Spain is ranked as 36th out of 144 countries in the actual WEF[3] Global Competitive Report (2012). Thus, it is classified as innovation-driven economy that has reached highest development stage. However, the recent financial crisis has hit Spain, that suffers since years under a structural deficit, on the wrong foot (OECD[4], 2010). As a consequence, Spain recently has had trouble to finance its debt over private capital markets and is dependent on EU financial support (Lopez & Bases 2012). Moody’s rates Spain just one notch above junk status and Standard & Poor puts Spain two notches higher at BBB-plus but with a negative outlook (Lopez & Bases 2012). However, the research target is to evaluate the long term competitiveness of Spain by applying Porter’s Diamond. Thereby, the question is will Spain revive?
Factor conditions: Spain