The final element in the Michael Porter’s Diamond model is chance. The Diamond Model explains that factors such as strategies adopted by a firm, demand condition, related and support industries, factor condition, Government in the country and chance which drive competitive advantage for a national market or economy over another. Among the factors, chance refers to random events that are beyond the control of an industry. These random events affect national and international competitiveness of a particular industry.

Even though Porter originally did not write anything about chance or luck in his papers, the role of chance is often included in the Diamond Model as the likelihood that external events such as war and natural disasters can negatively affect or benefit a country or industry. They can bring discontinuities affecting entire industry.  On a positive not chance also includes random events such as fundamental scientific breakthroughs occur. These events are beyond the control of the government, industry or individual companies. 

As already mentioned, the basic underlying view of the diamond model is that competitive advantage can be created. Therefore, nations can influence competitive advantage by systematically improving each of the elements of the diamond. In this connection, it is important to note that government interventions must be considered in terms of their impact on domestic company activities, because the underlying view in the diamond model is that “firms, not nations, compete in international markets.

I present hereby the case for explaining the ‘chance’ factor of Diamond Model of Sivakasi which is placed in South-west of Chennai which is known as ‘cracker city’. Covid 19 and air pollution brought a ban on bursting crackers. In India the festival of Diwali is famous for cracker bursting. Since 2019 Sivakasi is facing gloomy business.

While the ban of crackers is a welcome step as it will cut pollution, the livelihood of lakhs of people, already reeling under the Covid-19 crisis, is at stake. Satellite images taken by US space agency NASA in October already show signs of deadly dust clouds restricting a vast area of north India. The images explain how crop residue burning in several fields in Haryana and Punjab has resulted in increased levels of air pollution.

Sivakasi town has turned its water scarcity problem to an advantage by making it a suitable place for firework manufacturing. It is the natural choice for fireworks production. Low rain fall and a dry turbid climate prevailing in the area contributed to persistent production. What usually used to get consumed in three hours of the Diwali Day is produced in 300 days, almost with overtime jobs throughout the year.

This is the leading destination for fireworks in our country and ninety per cent of the fireworks are manufactured here. This ‘cracker city’ is often in news but for wrong reasons. The fireworks that are produced for almost 300 days in the year are consumed in about three hours on Diwali night. Sivakasi is the largest supplier of fireworks, and it has a business of about Rs. 800–1000 crores, and this market grew at a rate of 10% per annum.

The foundation for producing crackers was laid in the year 1934 when the Central Excise Duty on Matchboxes was propagated. Until the outbreak of World War II in 1939, there were only a handful of factories in Sivakasi, Trichur and Rimjalakuda in Kerala State. From 1938 to 1944 the import of fireworks and firecrackers was obstructed by war. This shortage gave a stimulus to the indigenous industry, which was in its infancy stage.

During the year 1940, the Indian Explosives Rule was passed whereby a system of licensing was introduced for manufacturing, possession and sale. Therefore the first organized factory with several precautions and safety measures was built. The shortage in the market helped these, then seasonal, factories to work even during off-season and build up stocks. With World War II coming to an end and the gateway for import of raw materials having been reopened, the indigenous industry enlarged itself.

The founder of the fireworks industry in Sivakasi was Mr. P. Iyya Nadar, who along with Mr. N.R.K. Rajarathna Nadar, started the production of raw materials for the fireworks. They slowly expanded their business to the production of Safety Matches, Star Matches and Colour Matches and then ventured upon production of sparklers. Some of the famous brands of fireworks came into existence such as Vasuki Traders, National Fireworks and Standard Fireworks. These three factories marketed their products throughout India.

Now, there are about 450 fireworks factories in Sivakasi, which are giving direct employment to about 40,000 workers and indirect employment to about one lakh people. The firework factories in Sivakasi also produce training weapons for military. These training weapons are used by the armed forces to train new officers.

Before the pandemic around 300,000 people worked in the industry directly and another 500,000 indirectly. Over 6.5 lakh families, directly and indirectly are dependent on this industry for their livelihood. Once a thriving industry, the firecracker manufacturing units in the city are facing an economic crisis and uncertainty as several states have announced a ban on crackers.

In 2018, the Supreme Court ordered to sell and manufacture only green crackers. In 2019, most manufacturers had not obtained any formula for green crackers therefore were in slip-up state. The raw material was purchased in lesser quantity and the sale was affected. The year 2020 experienced the global pandemic in which four states banned firecrackers which affected the business at Sivakasi. Fireworks are not the cause of pollution and neither are they hazardous. The pandemic affected this industry badly; its procurement was reduced from 80 per cent in 2018 to 60 per cent in 2020. In the year 2021, the industry saw procurement of only procured 60 per cent.

Manufacturers called the ban on crackers unreasonable, claiming Sivakasi was producing one of the cleanest crackers in the world. They say 365 days of the year there are pollutants everywhere and none of the environmentalists talk about it. They feel there is a hidden agenda to close down the fireworks industry.

The Supreme Court has said that the paramount need is the right of people to breathe and a cleaner air. Sivakasi has started manufacturing a cleaner product. This is how Sivakasi has been fighting a long battle to sell its firecrackers in the country for the last few years. Cracker manufacturers say the demand for a ban on fireworks is a “political stunt” and a “fashion statement”. They claim that at least 30 to 40 per cent of the firecracker industry will shut down permanently if the sales won’t happen this year (2021) as well during Diwali.

According to reports, the firecracker industry is estimated to have an annual turnover of over Rs 4,800 crore from 2,200 big and small factories in India employing over 9 lakh people in manufacturing units directly and indirectly. As an age-old tradition during the festivities, firecrackers are common on many occasions in India. Thus, a blanket ban during the festive months can be avoided, says the Confederation of All India Traders (CAIT), an apex trade body that represents 8 crore Indian traders and 40,000 trade associations.

The pathetic situation calls for a desperate need for a long-term plan.  And, the biggest strength of crackers industry has been adapting to the times. I am sure; this industry will strive ahead by innovating new and clean products. 

Michael Porter’s Diamond Model is also known as the Theory of National Competitive Advantage of Industries. It is a diamond-shaped framework that focuses on explaining why certain industries within a particular nation are competitive internationally, whereas many are not.

To maintain a country’s standard of living, organizations and citizens must learn to compete in an ever tougher world market which is called the VUCA (Vulnerable, Uncertain, Complex and Ambiguous) world. Organizations will sustain the competition in world with help of higher productivity and good product quality. The standard of living of a nation is measured by things that are easily quantified, such as income, employment opportunities, cost of goods and services, inflation rate, infrastructure, quality of education, poverty, life expectancy, and quality of healthcare etc. The government plays a big role in improving standard of living in a country.

The Diamond Model also talks why certain companies in certain countries are capable of consistent innovation, whereas others are not. Porter argues that any company’s ability to compete in the international field is based mainly on an interconnected set of location advantages.

Firm Strategy, Structure and Rivalry; Factor Conditions; Demand Conditions; and Related and Supporting Industries are the four conditions which if are favourable, they force domestic companies to continuously innovate and upgrade. The competitiveness that results from the above conditions is helpful and even necessary when an organization wants to go international and when it is battles world’s largest competitors.

Firm’s strategy, structure, and rivalry

This refers to the basic fact that competition leads to businesses finding ways to increase production and to development of technological innovations. The concentration of market power, degree of competition, and ability of rival firms to enter a nation’s market are influential here. This point is related to the forces of competitors and barriers to new market entrants. From the national context, the industries in which companies operate largely determine how companies are created, organized and managed. When firms face tough domestic rivalry, it becomes instrumental in fighting international competitiveness, since it forces companies to develop unique and sustainable strengths and capabilities. 

The more intense domestic rivalry becomes, the more companies get pushed to innovate and improve in order to maintain their competitive advantage. In the end, this helps companies to enter the international market. Porter believes that domestic competition is critical to spurring innovation within a nation and that monopolies impede this from happening.

Japanese automobile industry consists of intense rivalry among players such as Nissan, Honda, Toyota, Suzuki, Mitsubishi and Subaru. Because of their own fierce domestic competition, they have become competent to fight in foreign markets as well.

Factor Conditions

Focuses on the domestic buyers of the country; the target market is the local buyers. Factor conditions in a certain country refer to the natural resources; for example Saudi Arabia has the second-largest proven petroleum reserves, and is the largest exporter of petroleum in the world. It also has the fifth-largest proven natural gas reserves and is considered an energy superpower. The economy of Saudi Arabia is heavily dependent on oil, and the country is a member of OPEC (Organization of Petroleum Exporting Countries). This nation controls about one-third of OPEC’s total oil reserves, plays a leading role in the organization.

Factor conditions relate to the different types of resources that are present or absent within a nation. Resources can be typed into basic and advanced ones. The basic ones include useful natural resources and the availability of skilled labor, technology advancement, specialization and skilled knowledge and expertise, availability of capital, infrastructure, etc.

Porter does not give too much importance to natural resources as compared to the created resources because he observes that competitive advantage develops in industries in particular nations which are able to create these advanced and specialized factors.

It is important that these created factor conditions are continuously upgraded through the development of skills and the creation of new knowledge. Competitive advantage results from the presence of world-class institutions that first create specialized factors and then continually work to upgrade them. Nations thus succeed in industries where they are particularly good at factor creation. Singapore has achieved an extraordinary level of prosperity. The country has maintained a remarkably open and corruption-free environment, stable prices, and a per capita GDP higher than that of most developed countries.

Demand Condition

Demand conditions invariably talk about the domestic demand which indicates how successful a particular industry within a certain nation is. A strong home demand of industries in their own nations creates a large market for them and therefore, creates opportunities for them to grow. When a country experiences presence of sophisticated demand conditions from local customers it pushes the organizations to grow, innovate and improve quality. When organizations strive to satisfy their domestic demands and when they face challenges to satisfy domestic demand the condition drives companies to scale new heights and possibly gain early insights into the future needs of customers in international market.

Nations thus gain competitive advantage in industries where the local customers are demanding and pressure companies to innovate faster and achieve more sustainable competitive advantages than their foreign rivals.

Singapore Airlines has a range of subsidiaries and associate companies in diverse fields of the aviation industry to support its operations. For instance, it wholly-owns three airline subsidiaries, namely SilkAir which operates regional flights to secondary cities, and Scoot and Tigerair which operate in the low-cost carrier sector. The world-famous company is acclaimed for the stellar service standards of its kebaya-clad flight attendants.  The airline is also famous for luxurious flight experiences across cabin classes, with state-of-the-art entertainment options, spacious cabins and a commitment to making flying a personal experience.

It is worth noting that aviation in Singapore is a key component of the Singaporean economy in its quest to be a transport hub of the Asian region. Besides currently the sixth busiest airport and the fourth busiest air cargo hub in Asia, the Singaporean aviation industry is also a significant aerospace maintenance, repair and overhaul centre. More demands inevitably mean more challenges, but these challenges turn the companies toward innovation and improvement. The size of the market, the growth rate of the market, etc. are some indicators of the home demand.

Related and supporting industries

According to Porter, the level of success of one industry can be related to the success of related and supporting industries. The role of suppliers is equally important. The suppliers help in advancing innovation processes through shared resources- technical and other types of aids. A reputable supplier should have a history of supplying acceptable product and value-added service, as evidenced by the number of years in business, customers’ opinions, financial stability and past audit results. Organizations are often dependent on alliances and partnerships with other companies in order to create additional value for customers and become more competitive. 

The automobile industry is one of the most important drivers of economic growth of India and one with high participation in global value chains. The growth of this sector has been on the back of strong government support which has helped it carve a unique path among the manufacturing sectors of India. The auto components manufacturers have backed the automobile industry to a great extent. The timely upgradation of syllabus of automobile engineering has also added essence to industry. Lastly, automobile manufacturers could invest and collaborate in joint R&D and other innovation.

Government

Governments should encourage and push companies to raise their aspirations and move to even higher levels of competitiveness. This can be done by stimulating early demand for advanced products by focusing on specialized factor creations such as infrastructure, the education system and the health sector (factor conditions); promoting domestic rivalry by enforcing anti-trust laws; and encouraging change. The government can thus assist the development of the four aforementioned factors in the way that should benefit the industries in a certain country.  The major functions of governments in market economies are: the governments provide the legal and social framework, maintain competition, provide public goods and services, redistribute income, correct for externalities, and stabilize the economy.

Chance

Even though Porter originally didn’t write anything about chance or luck in his papers, the role of chance is often included in the Diamond Model as the likelihood that external events such as war and natural disasters can negatively affect or benefit a country or industry. However, it also includes random events such as where and when fundamental scientific breakthroughs occur. These events are beyond the control of the government or individual companies. 

COVAXIN®, India’s indigenous COVID-19 vaccine by Bharat Biotech is developed in collaboration with the Indian Council of Medical Research (ICMR) – National Institute of Virology (NIV). The coronavirus disease 2019 (COVID-19) pandemic continues to bring in its wake not only morbidity and mortality but also an unprecedented challenge to public health, food systems, human dignity, and work across the world. This is an apt example of chance.  India celebrated the milestone of administering 1 billion COVID-19 vaccine doses on Thursday, 22^nd October 2021. Covaxin has helped the nation in achieving the one billion mark.