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Company Achievement Towards Low-Cost Leadership by Cost-Efficient Management Assessment Answer


Question 1

Critically discuss, how a company achieves low-cost leadership over rivals by cost-efficient management of activities.

Paragraph22-26 paragraphs
Business examples4 examples with title (example)
Key challenges3 challenges-itemised
Recommendations3 recommendations-itemised
Critical arguments2 critical arguments- with title

Answer should cover:

The  need for cost leadership in a given industry10
Application of Porter’s generic strategy on cost leadership50
Key challenges and recommendations20
Critical arguments10
Business Examples using specific industry10

Page 210 Gerry Johnson (new edition) book and Top Glove 2018 annual report

  1. Economies of scale
  2. Experience and learning curve effects
  3. Operate at full capacity. 
  4. Supply chain efficiency. 
  5. Using lower cost inputs 
  6. Value chain system to gain concessions.
  7. Information technology to achieve operating efficiencies. 
  8. Employing advanced production technology 
  9. Cost advantages of outsourcing or vertical integration. 
  10. Motivating employees –productivity improvement

Question 2

Critically discuss the rationale for a firm to pursue a related diversification strategy in order to improve performance and building shareholder value through cross-business strategic fit.

Paragraph22-26 paragraphs
Business examples4 examples with title (example)
Key challenges3 challenges-itemised
Recommendations3 recommendations-itemised
Critical arguments2 critical arguments- with title

Vertical integration 

  1. Backward integration-detail explanation with illustration
  2. Forward integration- detail explanation with illustration
  3. Purpose/advantages of forward and backward
  4. Cross business strategic fit along value chain (detail answer in Gamble PG 217)
  5. Disadvantages of vertical integration
  6. Business example
  7. Critical argument

Question 3

Critically discuss factors to consider before launching product internationally and how Porter Diamond Model can be applied.

Paragraph22-26 paragraphs
Business examples4 examples with title (example)
Key challenges3 challenges-itemised
Recommendations3 recommendations-itemised
Critical arguments2 critical arguments- with title

Diamond model 4 factors to consider

  • Demand condition
  • Factor condition
  • Related and supporting industries
  • Firm strategy

Additional issues

  • Resource capabilities
  • Market research before entry
  • Method of expansion etc.


Question 1: Company achievement towards low-cost leadership over rivals by cost-efficient management of activities.


Strategic management is a business practice to accomplish the organizational goals and objectives by using the resources strategically. Therefore, in order to achieve low-cost leadership in the competitiveness of the market, organizations utilize different strategies. Efficient cost management strategies are used widely by the companies as it enables them to use the resources actively and in such a way that wages of the company can be reduced and profitability can be increased. Thereby, in this question, cost-efficient management activities will be discussed as to how it enables the organizations to achieve low-cost leadership in the market.  

The need for cost leadership in a given industry

In the view of Johnson (2016), cost leadership defines the strategy to achieve a competitive advantage by maintaining the lower operational cost of the business in the industry. Therefore, there are a number of companies who use a cost leadership strategy. In this section, the rubber industry has been chosen. Top Glove is one of the leading rubber glove manufacturer companies based in Malaysia (Top glove, 2020a). It has been observed that the company has achieved cost leadership in the market to achieve competitive benefit. Below, the need for cost leadership has been discussed in the context of the Top glove business:

Vertical integration

Cost leadership enables the organizations to achieve high productivity at a lower cost but with good quality. Therefore, in this way, it has become possible for Top glove to supply products to the customer at the lowest range in the market (Top glove, 2020a). In this case, the company has applied vertical integration and the production is maintained with two or more stages to reduce the cost. 

Experience and learning curve effects

Learning curve model defines that by doubling the quantity of the production, the production cost can be decreased by a fixed proportion. In this way, a cost leadership strategy is helpful to develop a profit in business. 

Operate at full capacity

Operating at full capacity refers to the limit of resources in which a company reaches and gives up the opportunity to do something else. Cost leadership strategy enables the marketer to operate their business with a specific capacity.  

Value chain system to gain concessions

Value chain system focuses on the development of the maximum value of the product or services of a company by keeping the profit margin the same in the market. The top glove has used the value chain system effectively to achieve cost leadership in the market. 

Information technology to achieve operating efficiencies

In order to maintain the quality of the products and to supply them in the market at low cost, Top glove has adopted technology in their production. Along with that, technology has enabled them to maintain operational efficiency as well.  

Employing advanced production technology 

The advanced production technology of Top glove has helped the company to achieve cost leadership in the market. In this case, the company has used technology like automated glove striping, water leak testing, surgical glove auto packing and others which has helped the company to achieve competitive advantage as well (Top glove, 2020b). 

Motivating employees –productivity improvement

Along with that, cost leadership is also effective to motivate the employees as due to highly competitive advantage, the brand value of the company increases as well, therefore employees feel secure and productivity of the company is improved. 

Application of Porter’s generic strategy on cost leadership

As mentioned by Omsa et al. (2017), porter's generic strategy defines the way in which a company can achieve a competitive advantage in the market. In the porter's generic model, there are three major strategic options named cost leadership, differentiation and focus strategy. Therefore, it can be stated that the cost leadership strategy of porter's generic model is one of the effective strategies to achieve competitive benefit in the market.

Porter’s Diamond Model

Figure 1: Porter’s generic strategy

(Source: Johnson, 2016)

Wantara and Tambrin, (2019) mentioned that pricing of the products is one of the critical factors that customers consider highly before purchasing any product. That is why the cost leadership strategy states that it is needed to maintain the low pricing range of the product to achieve a high customer base in the market. In this case, it is essential also to maintain the productivity cost at low, otherwise, it is possible to manage the low pricing range of the product. Lower cost inputs are used in order to maintain a business with cost-efficient strategy. That is why cost leadership strategy has enabled Top glove to reduce their production cost. The company has gained business sustainability in the market by using the cost leadership strategy. In order to measure the supply chain efficiency, cost leadership strategy is necessary as it defines how a company uses the resources accurately. In these resources, financial, intellectual, and physical and human resources are included. As cost leadership strategy is based on price-sensitive issues of the market, therefore, it is essential to use the resources accurately. One of the major reasons for using cost-efficient strategies in business is to increase the market size and customer base as consumers prefer high-quality products at low cost in the market. Therefore, in this way, Top glove has developed its productivity by reducing the per-unit cost of the product. 

Key challenges and recommendations

There are some challenges in the cost leadership strategy that organizations may face. They are discussed below:

Financial cut

In order to achieve cost leadership in the market, it is necessary to reduce wages in some operational areas. Therefore, most of the organization reduces the cost from critical areas (such as customer service division) which affects directly in the business operation. 

Reduces product innovation 

As productivity is maintained at a lower cost, therefore, it is not possible for the organization to bring innovation in the product or business operation. Organizations spend less money on the research and developmental area of business operations which lacks the innovation of products. 

Requires large volume of sale

Along with that, it needs to mention that to achieve cost leadership in the market, it is required to have a large number of sales, otherwise, it will not be possible to achieve overall profitability. 

Below some recommendations are provided that organizations can use to achieve cost leadership in the market:

Reducing the operational cost

Firstly, organizations need to average price from the industry for products or services. Therefore, in this way, it is possible to increase the profit of the company by reducing the operational cost. 

Maintaining the average price of products

On the other hand, charging the lower price from the market is also effective to increase the market share. Through this process, it is possible to achieve a reasonable profit as sales numbers will be increased. 

Implementation of the advanced technology 

In the modern business world, the use of technology has increased highly by companies. That is why organizations need to adopt the advancement of technology in their business to reduce operational wages. As mentioned by Puri and Nayyar, (2016), the automation process is used by the organizations as it reduces human labour cost by eliminating the traditional production method. For this purpose, automation processes need to be adopted to lower the operational cost and to achieve cost leadership in the market.  

Critical arguments


One of the major advantages of cost leadership strategy is it reduces the competition in the market. Through the cost leadership strategy, organizations gain a huge number of customers through their superior pricing model, so new competition is limited in this case. On the contrary, product innovation is not emphasized in the cost leadership strategy that is why, in this case, other organizations get benefit by developing innovative products to attract the customer. FutureofWorking (2020), argued that in cost leadership strategy, research and development is the most neglected area where organizations invest very less. Therefore, rival companies take advantage of this area by developing innovative products and selling them at an average cost in the market. In order to sustain its competitive advantage, innovation is highly effective and needs to be concentrated equally.  

Uses of technology:

In the cost leadership strategy, it is required to maintain the lower production cost and high productivity simultaneously. That is why adopting the advanced technology of automation process is required to develop the volume of productivity as in order to supply a huge amount of product within a specific time in the market, the conventional method of production is not always applicable. However, Puri and Nayyar, (2016, March) further stated robotics and automation technology can provide the utmost benefit to the organizations by enabling them to produce a large quantity of the product in very less time. In this way, operational wages can be reduced as well which helps to achieve cost leadership in the market. On the other hand, the high cost of the implementation of technology in the business operation needs to be mentioned as it increases the organizational wages. Therefore, often it has become an issue to adopt technology to enhance productivity for achieving cost leadership.  

Business Examples using specific industry

In the global retail food and grocery industry, it has been observed that there are a number of companies who use the cost leadership strategy to change the market landscape. Therefore, from the research of Johnson (2016), a few examples are provided below to define how cost leadership strategy is helpful for the organizations to achieve the desired market among their competitors.  


Waitrose is a British supermarket who sells retail products for adults and babies both (Waitrose, 2020). Waitrose has adopted differentiation strategies in their business as the company produces superior quality, fresh and eco-friendly products in the market at a higher price than its competitors.  


Lidl is a German international discount supermarket company who sells the highest quality baked food products in the market. The company has mainly emphasized on the quality of the products to achieve the leading position in the market. 


Tesco is one of the leading British multinational grocery companies in the retail company who sells electronics, clothing, furniture, toys and other products as well besides food products in the UK market (Tesco PLC, 2020). However, in order to achieve cost leadership, Tesco has targeted customers who look for simple and good value products. 


Sainsbury is the second-largest supermarket chain company in the UK retail market (Sainsburys, 2020). In its cost leadership strategy, the company has focused on the superior quality of the products than cost. Along with that, by providing discounts throughout the year in the products, Sainsbury has achieved a customer base in their business.  


In conclusion, it can be mentioned that by using a cost leadership strategy actively in the business, organizations can achieve a competitive advantage in the market. However, there are some challenges as well in the proper implementation of the cost leadership strategy that may affect the business operation of the organizations.  

Question 2: Rationale for diversification strategy and cross-business strategic fit


Diversification strategy is another major element in the porter generic model which defines that organizations enter into new markets with new products or existing products to achieve a desired advantage in the business. Therefore, in this question, this strategy will be discussed to improve the performance of the organization and to build the stakeholder value as well.  

Backward integration

Backward integration is actually a form of vertical integration and it occurs when the companies expand their roles and responsibility to accomplish their tasks by the supply chain of business. As mentioned by Li and Chen, (2018), backward integration is associated with the buying and merging procedure of a company with other organizations through supplying the products or services. For example, organizations purchase their raw materials or inventory from other companies. Backward integration strategy is majorly used to boost the efficiency of the organization as it allows the organizations to achieve control over their suppliers and enhance the supply chain efficiency. 

Most of the organizations adopt a backward integration strategy in their business because it improves efficiency and reduces the organizational cost as well. Backward integration cuts down the transportation cost significantly and, in this way, increases the profit margins. Therefore, by adopting this strategy, business firms become more competitive (Johnson, 2016). It has been observed that business firms implement backward integration strategy through merging the business with other companies, still they establish their own subsidiary to accomplish the business objectives. However, backward integration ensures the continuous supply of raw materials in business through securing the bargaining leverage on the suppliers. In order to achieve a competitive advantage, this strategy is majorly used as it improves the organization's performance and develops stakeholder value as well.   

Forward integration

Forward integration is another form of vertical integration which is contrary to backward integration. According to the view of Günther and Theisel (2016), forward integration strategy involves the business activities that are expanded to control the direct distribution of the supply of products or services. For example, a forward integration strategy is adopted when a farmer sells the crops directly in the local market rather than through a distribution centre. Therefore, a forward distribution strategy is applied for the direct supply of products in the market. 

Porter’s Diamond Model

Figure 2: Forward integration

(Source: Johnson, 2016)

In order to improve the operational efficiency of the organization, a forward integration strategy is highly effective as it eliminates third parties from the distribution operation and increases profitability. Therefore, in this way, a competitive advantage can be achieved in the market. This strategy increases the control of the organization on the suppliers, manufacturers and distributors. In this way, the market power of business firms is increased. The stakeholder value could be increased also through this strategy as in this strategy, both manufacturing firms, retailers or customers achieve benefit by enhancing the profit in business.

Advantages of forward and backward

Forward integration and backward integration are the major forms of vertical integration. However, both of these integration strategies have multiple advantages which are helpful for the organizations to enhance their profitability. Below, these advantages are discussed in table manner:

Backward integration strategy
Backward integration
Cost control
One of the major benefits of backward integration is it enables the organization to be in the cost control process (Li and Chen, 2018). As in the conventional method, resellers earn profit from each phase of the product, therefore, as in this strategy product distribution is direct it helps in cost control.
Control on the value chain 
Through this strategy, it is possible to achieve control more on the value chain. Therefore, operational efficiency is increased and direct access to the materials is achieved. 
Achieving competitive advantages 
It is one of the effective ways to achieve a competitive advantage by developing the direct accessibility of the materials and increasing the profit. 
Forward integration strategy
Forward integration
Coordination in supply chain
It enables the coordination in the supply chain as synchronization of supply and demand is necessary for this strategy (Günther and Theisel, 2016, June).
Reduction of operation cost
It reduces market transaction cost, transportation cost and others and reduces the entire operational cost. 

Table 1: Advantages of forwarding and backward integration strategy 

(Source: Developed by author)

Cross business strategic fit along the value chain 

Strategic fit can be considered as a degree to measure whether the resource and capabilities of an organization match with the external environment or not (Prajogo, 2016). Therefore, in this way, organizations use this degree to execute their business strategy accurately in the external market. Along with that, strategic fit exists in the business when in the value chain of business different opportunities are present in the cross-business resource transfer. Cross business strategic fit is used in many cases such as:

  • To develop stronger competitive capability.
  • To achieve a potent brand name. 
  • To lower the cost of value chain activities and enhance the performance of the organization as well.

However, the cross-business strategic fit is a value chain system as cross-business transferring and sharing of resources enhances the quality of business operation and develops the value chain as well. Below, some examples are presented in details for this activity: 

Transferring specialized expertise: 

Organizations transfer their expertise with each other to develop their operational activities. For example, Google transfers its expertise with other organizations to develop the value chain of other companies (Thompson et al., 2013).

Sharing cost between business firms:

In order to conduct a single business operation, business firms share costs with each other. It has been observed that often it is profitable to manufacture from a single plant which is why this activity is occurring.

The common use of brand name: 

Through the common use of the brand name, it is possible to attract customers of the other companies in the business. For example, Yamaha’s brand identity is used to establish the brand identity of Waverunner (Thompson et al., 2013).

Disadvantages of vertical integration

Vertical integration has some disadvantages that may affect the operational activity of the organizations (Ishii, 2016). Among them, major disadvantages are discussed below:

Generates capacity-balancing issue

In this strategy, businesses need to set up access of upstream capacity in order to ensure the downstream operations to achieve proper raw materials supply in any condition. Therefore, in this way, this strategy generates capacity balancing issues in the business. 

Barriers in the market entry

Vertical integration strategy can create problems in the market entry of manufacturing businesses that have high control over the raw materials. They can face the threats of antitrust regulators as they are influencing market concentration. 

Requires huge investment

In order to adopt a vertical integration strategy, companies need to have a high amount of capital. In this strategy, it is required to buy new facilities, recruit new employees and others for which it is necessary to have sufficient amounts.

Business example

There are several businesses that adopt the related diversification strategy as a means of expanding their business and operations in order for it to diversify their business surrounding the core competencies of the business. Some of the most relevant examples are: 

Starbucks: Although the primary activity of the company is to produce and provide coffee to the population, the intentions of the company is to diversify its services to the food industry of the USA as well. The related diversification through the purchase of Evolution Harvest granola bars and La Boulange pastries have enabled the company to offer associated food items like pastry and granola bars with their coffee (Manifested Marketing, 2020). It complements them.

Disney: It diversified its portfolio with the purchase of ABC to expand their hold in the entertainment industry and exploit the core competency of the company of TV content production (Favaro, 2020).

IKEA: The related diversification of IKEA into TV manufacturing is a fine example. The company has forayed into other aspects of the home furnishings with entry into the TV market (Favaro, 2020). However, it is for solving the issues faced by the consumer with TV fitting into their furniture.

Honda: Honda has been one such example when the research and development of the motorcycle engines led to the development of the skills of building smaller and reliable engines which made it to diversify into the car industry.

Critical argument

Leveraging Developed Skills

The related diversification of the business is intricately related to the necessity to leverage the developed skills of the company or to facilitate value-added for the consumers. It means that the development or the expansion of the business into a new market or into a new product would definitely be associated with the needs of the consumers or the competency of the company itself (Fitjar and Timmermans, 2017). The development and growth of the company may often result in the development of abilities that are not required for the business but can be considered a surplus for other industry, the related diversification would lead to accruing benefits to the organization. 


The foray of the business into a new market or a new product means that the profitability of the business would be improved with the increase in the sales of the products and services (Weiss, 2016). Therefore, related diversification utilizes the existing proficiencies of the business to enable the company to deliver new products in the existing market or existing product in a new market for profitability.

Key challenges

The key challenges of related diversification are as follows:

1. The total management tasks needed for the related diversification for a greater number of business activities is a challenge. Due to the management strains on the company, the efficiency of the business expansion and the associated activities of related diversification causes a challenge for the management activities to be undertaken. 

2. The related diversification also limits the available financial resources that can be used and so lose out on the growth opportunities. Therefore, growth opportunities are a challenge for related diversification as substantial investments cannot be made and this limits the development and growth for it. The ability of the company would be limited to respond to the changes in the market. It is a challenge of related diversification and it limits the innovation of the company as well. 

3. The related diversification may also be often identified wrongly and that is a significant challenge which is posed by it. The ambitions of the business may cause excessive over the expansion of the business and related diversification would most definitely fail in such cases. The interpretation of diversification is termed as expansion. 


The recommendations for related diversification are as follows:

  • The companies should identify the related needs to pursue related identification. There should comprehensively research and analysis to understand the motivations of the people and the company to understand if the related diversification is borne out of necessity or is simply an expansion intention of the company for profits. 
  • The management should closely follow the diversification strategy to be aware of the challenges and issues faced by them so that they can respond to them immediately. The ability of the company to respond to issues would also determine the success of the diversification and enable the business to align the services of the company with the intentions of the consumers.
  • The allocation of the financial resources for related diversification and sales often results in strain on the operational ability of the company. Therefore, it is recommended that intelligent and innovative decisions of lean management should be applied in the company in order for the business to continue to operate despite the limited availability of the finances for the business. 


Thus, the discussion shows that a business firm needs to pursue a diversification strategy to improve the performance of the business and to generate value for the stakeholder as well. Through adopting cross-business strategic fit activities, it is possible to achieve sustainability in business and to gain benefit in terms of competitiveness. 

Question 3: Factors to be considered before launching a product internationally 


The current segment of this study is developed for focusing on the factors a company needs to consider prior to launching a product in the international market and on the application of Porter's Diamond Model. Porter's Diamond model refers to an economic model developed by Michael Porter with the aim of highlighting and explaining the reasons for which certain industries within a specific country become competitive internationally or at a particular market area or at the domestic level, whereas at others might not. 

Porter’s Diamond Model

The model developed on four factors such as Demand Conditions; Factor Conditions; Related and Supporting Industries, Structure and Rivalry; and Firm Strategy. The above mentioned four interacting factors of Porter Diamond Model or determinants related to locational advantage use to work in the following manner:

Factor conditions: According to the arguments of Porter the ability of any company to compete with others in the international marketplace is mainly based on the interrelated series of advantages attached to that location that some industries in the different countries possess. In a particular country, factor conditions refer to capital, human resources, and natural resources available (Vlados, 2019). These conditions refer to all the factors related to production that ate applied to create a product or service. Factors conditions involve conditions related to the availability of raw materials, labour, and land. As per Johnson (2016), its advantages at the national level and can get translated into the general competitive advantages for the domestic companies in the international markets. In relation to human resources, factor conditions mean skilled labour force, a scientific base of knowledge, and good infrastructure as much as required for production. This particular factor of Porter’s Diamond Model is identified by companies to measure the factors required to be present within a location for production.

Home demand condition: According to Johnson (2016), domestic customers' nature can be the source of a company's competitive advantage, and dealing with the demanding and sophisticated consumers at the domestic help helps a company to perform effectively in the overseas market. As per Jhamb (2016), the most significant characteristics determining this particular factor of Porter's Diamond Model include the demand's composition, its growth patterns, and size, and its domestic demand's internalization. More emphasized made on-demand in the domestic market instead of demand in the international market as companies are aware and understand the domestic market compared to the international market and react to its demand faster. The increase in the company's product's demand motivates them for adopting new technologies with less fear that every facility will be used (Jhamb, 2016). For instance, In Italy and France, the sophisticated local consumers have assisted in keeping their industries involve in local fashion at the leading edge for several decades. Porter’s Diamond Model

Figure 1: Porter’s Diamond Model

(Source: Johnson, 2016)

Related and supporting industries: As per Vlados (2019), for the companies’ and country’s overall success and growth, it is highly important for every industry domains to stay interconnected with each another and helping one another to flourish and grow with having a holistic approach in mind and this factor of Porter’s Diamond Model talks about the same. Local clusters of mutually supporting and related industries stand as a significant source of competitive advantage. Often, these are based regionally by making personal interaction easy compared to others. The strong presence of industry suppliers uses to accelerate the innovation process and also uses to upgrade the business includes in the cluster. The existence of the related industries provides a better opportunity for the companies located in the cluster to identify new business opportunities and share information (Ismail and Aman, 2018)

Firm strategy, rivalry, and industry structure: This factor of the model focuses on competition within the domestic market from the contemporary industries. These industries challenge companies to come up with innovative and novel products, efficient customer services, and unique techniques of manufacturing which helps companies to secure growth, and that results in their overall development as well as the nation’s overall development (Bhasin, 2020). With these, the companies remain concerned on a continuous as well as a consistent basis of competing with others. Here, it is mentionable that the rivalries, characteristic strategies, and industrial structures in different nations can also be the bases of competitive advantage.

Additional Issues

Resource capabilities

Resource capabilities: Resources refer to the company's assets (financial and non-financial), skills, and knowledge. Capabilities are defined as a company's capability to effectively use its resources. While launching a product in the international market companies face issues related to resource capabilities. The issues related to resources while launching a product in the international market include less availability or unavailability of resources, high prices of resources that increase the final price of the product to be launched, and less or tough accessibility of resources. The availability of resources decides a company's capability to a significant extent, but a company must have the required skills and expertise of using the resources optimally while launching a product internationally. The more a company stands capable of utilising its resources the greater it becomes able to ensure the success of its product launch in the international arena (Morais and Ferreira, 2020).

Market research before entry 

Before launching a new product into an international market, every company needs to conduct market research. Conducting market research is a complex and time-consuming process but it helps companies to target the best set of audience and market to place their product to make it successful. Also, the process of market research that includes identifying buyer's persona, engaging a required number of participants for market research, preparing research questionnaire, and preparing a list of the prospected primary competitors are problematic for a company’s marketing executives while conducting market research before launching a product internationally (Brace, 2018). Effective market research needs experienced and skills marketing staff and executives who can identify potential threats and opportunities prior to launch a new product into a new market. Here, less availability of experienced and skilled marketing executives for market research stands as an additional issue while entering into an international marketplace.

Methods of expansion 

There are a number of methods that can be applied by companies for expanding their business internationally. These methods include the followings:

  • Merger and Acquisition: This is the most common method of business expansion. In order to apply this method, a company expands by acquiring another existing company or merging with another company which is almost always smaller in size (PBM, 2020).
  • Franchise: Offering ownership to similar businesses or other entrepreneurs as a franchise is another method of business expansion.
  • Go Public: With this method, a company expands by offering its stock in public via IPOs (initial public offerings) or DPOs (direct public offerings).
  • Joint Venture: Joining industry cooperatives for achieving savings in some common areas of business operations, including purchasing and advertising is another method of expansion (PBM, 2020).

Business examples

Industries/sectors/businesses that have applied Porter’s Diamond Model: 

For instance, the linguistic capability of the Swiss has provided a huge advantage to its banking industry. Another example in this respect is the availability of cheap energy has provided an advantage to North America to build a strong aluminium industry. In both these instances, the ‘Factor condition’ factor of the model is applied (Johnson, 2016).

As an illustration, Silicon Valley applies this model, specifically the Related and supporting industries factor of this model to form a cluster that includes software, hardware, venture, and research capital organisations all of which together create a circle of enterprise backed up with high-technology (Johnson, 2016).

In order to give an example on the use of Porter's Diamond Model, mainly the fourth factor (that is, Firm Strategy) of it’s by the companies it can be stated that the strategy of German companies to investing in developing technical excellence provides them with the characteristic advantage in engineering industries as well as led them to create large pools of expertise (Johnson, 2016). 

Key challenges of launching product internationally

The key challenges a company faces while launching a product internationally are as follows:

  • Local competition: As per Brooks (2020), it is tough to persuade foreign customers to trust new brands when substitute domestic products are available. Thus, local competition from domestic products stands as a key challenge for a company tends to launch its product in the international market. 
  • International compliances along with regulatory issues: It becomes quite complex and tough to understand the international trade laws, taxation, and other business-related compliances along with regulations. Legal intricacies attached to government regulations and rules create challenges for companies while launching products internationally.
  • Cultural and language barriers: Misunderstandings or less understanding about the language and culture of an international market is a key challenge that often hinders a company’s international progress (Vickery, 2020). It creates barriers for the company to gauge and interact with target customers on an international market. Less understanding about the foreign market’s customers’ perceptions restricts a brand to get presented properly in front of the local people. 


The launch of the product is not limited to the development or marketing but there are several other factors that must be considered by it. The recommendations which can be made for the launch of the product in the market are as follows: 

  • Conduct extensive market research to understand the needs of the consumers of the international market and ensure the product fits the demands and is a gain creator for them. This would substantially increase the success probability of the product in the international market.
  • A local supply chain for the resources should be developed for the procurement and production of the product for sales into the market. These local suppliers would also help in keeping the operations and production cost of the product low and ultimately help in keeping the prices of the product low as well.
  • Consider the legal and ethical implications of the product in the local market so that the product obeys all the laws.

7. Critical arguments 

Ethical and Legal Compliance

The development and launch of a product in the international market are subject to several factors such as legal, ethical, social, cultural and others. These factors would reflect upon the need and the demand for the products in the market can be gauged by the business. The international market also has different legal requirements which must be individually fulfilled in each market for operations (Griffith and Yalcinkaya, 2018). The business environment is reflected upon by these actors and its analysis provides a concise overview of the market and factors that may impact them. Hence, the consideration of these factors would result in a better understanding of the international launching of a product. 

Product Suitability

On the other hand, the suitability of the product in the international market is also a consideration as the sales and acceptability of the product by the consumers would be affected by it (Roberts, Candi and Hughes, 2017). The strategies of the business and the company should, therefore, focus upon these factors to mitigate their detrimental effects upon the launch of a product in the international market. 


The four conditions of Porter’s Diamond Model need to stand favourable as it forces the domestic companies to continuously upgrade and innovate. The competitiveness result from these is helpful as well as necessary for companies when going internationally and involving in the battle with the largest competitors of the world. Besides the favourableness of these factors, companies face some common issues while launching products internationally which are mitigable in the long-run and they succeed.

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