ACCA Strategic Professional · Strategic Business Leader · Environmental issues
In the country of Tarsen, five domestic software firms of similar size compete fiercely for talent and clients, and none has government protection. Industry observers note that all five now sell successfully abroad. Which proposition from Porter's Diamond best explains this?
Porter's firm strategy, structure and rivalry element explains it. Intense domestic competition pushes firms to innovate, cut costs and improve quality, making them stronger international competitors. Protection or dominant champions would reduce this pressure, and the scenario shows no subsidies or natural resource advantage.
- AStrong domestic rivalry stimulates innovation and efficiency, helping firms become globally competitiveCorrect
- BGovernment subsidies are the main route to export success
- CDominant national champions with little competition achieve economies of scale that guarantee export success
- DSuccess is explained purely by inherited natural resources
Explanation
Porter argued that vigorous local rivalry forces continual improvement and innovation, so firms are tougher abroad. Protected monopolies tend to become complacent. The scenario explicitly rules out protection, and software has no natural resource link.
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