Policy Implications Of Porter’s Diamond Theory Essay

Question:

Discuss about the Policy Implications of Porter’s Diamond Theory.

Answer:

The “Porter Diamond” was a model designed by Michael Porter, a popular scholar on economic competition and corporate strategy. It was developed for understanding the economic condition of the “competitive advantage” of the nations (Riasi, 2015). The model comprised of four determinants and two outside forces. All these factors could be implied on the medical tourism industry of Thailand.

Medical tourism in Thailand has been a relatively new emerging concept facing a phenomenal growth over the past decade. The implications of policy of the Porter Diamond theory on this industry would be easier as there are future scopes to develop in this sector (Beleska-Spasova, Loykulnanta & Nguyen, 2016).

The application of the theory by Thailand’s government to develop the medical tourism industry has been discussed in the essay.

The medical tourism has an effective appeal to the emerging economies of Thailand. Thailand posses a significant share from the medical tourism sector growing at the rate of twenty percent every year. The possibility of impacting the healthcare organizations could be analyzed by the factors as explained by the “Porter’s Diamond of National Competitiveness” (Beleska-Spasova, Loykulnanta & Nguyen, 2016).

The framework of Porter comprised of four divisions of national attributes. These attributes has determined the “competitive advantage” of a country. This is known as the “National Diamond”. This includes the demand conditions, factor conditions, firm strategies and rivalry and related industries. Porter also suggested two more outside forces such as the government policy and the change supporting the “national competitiveness”. The government communicates with these determinants by backing the competitive advantage. As claimed by Porter, the determinants shape the surroundings where the local firms contests and promote the development of competitive conditions.

This “factor conditions” of the framework by Porter, included the factors like geographical area and language barriers. To favor the attribute the natural environment of Thailand is found pleasant throughout the year. It has well planned road infrastructures with important international airports connected globally. Thailand has been leading the world in surgical procedures also. Applying the factor, medical tourism in the country has become cost advantageous for the government (Alberti et al., 2014).

The “demand condition” of Potter denoted the amount of customer preferences in certain region. This is easily applicable to Thailand, as the strong demand for the cosmetic procedures has contribution on the overall development in the medical tourism. Thailand also stands first in surgical procedures. These demand for these services have generated specialist expertise for Thailand’s healthcare. (Alberti et al., 2014).

The “related and supporting industries” factor could go for Thailand as the Bangkok region of Thailand has efficiently developed its infrastructure over the last decade. For this, Porter suggested to consider the growth of particular industries taken in cluster of several nations. Thailand was favorable for this due to the economic outburst in the region occurred by the creation of international airports. The Diethelm travel agency in collaboration with the Bumrungrad hospital has formed the leading inbound organization for the tourists (Alberti et al., 2014).

For the “firm strategy structure and rivalries”, Porter claimed that the performance of the firm might be close to the “national competitive advantage”. It could be easily applied to Thailand as healthcares like Bumrungrad hospitals have pioneered the medical tourism. As a result of this, the inflow of the international patients increased about seven times in the past decade. (Coelho, 2015).

The government plays the facilitator’s role of the “national diamond”, as suggested by Porter. The activities of the government were a crucial variable to the determinants of Porter’s framework. The government could act as the fundamental purchaser of healthcares. The supporting and related industries could get influenced by government’s control on market regulations, tax policies and advertising. However, there exists the role of chance events. Some examples of it may be the shift in world financial market and political and war decision of the government (Alberti et al., 2014).

Thailand has been competing in the medical tourism sector on the basis of cost price advantages. In order to sustain the development, these markets have to diversify in the areas of the treatment products. The “national diamond theory” of Porter provides a clear idea of sustaining the potentials by demonstrating the growth in medical tourism for a longer time.

References:

Alberti, F. G., Giusti, J. D., Papa, F., & Pizzurno, E. (2014). Competitiveness policies for medical tourism clusters: government initiatives in Thailand. International journal of economic policy in emerging economies, 7(3), 281-309.

Beleska-Spasova, E., Loykulnanta, S., & Nguyen, Q. T. (2016). Firm-specific, national and regional competitive advantages: The case of emerging market MNEs—Thailand. Asian Business & Management, 15(4), 264-291.

Coelho, C. L. C. E. (2015). Healthcare and medical tourism-Cascais Municipality case study (Doctoral dissertation).

Riasi, A. (2015). Competitive advantages of shadow banking industry: An analysis using Porter diamond model. Business Management and Strategy, 6(2), 15-27.

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