Porter’s Diamond Model for Old Mutual Company

Michael Porter’s Diamond Model

Michael Porter, an American Strategy professor, incepted an economic diamond model for enterprises that would assist the set ups regarding level of competition in global markets. The model is commonly referred to as Porter diamond model or Porter Diamond theory of National Advantage owing to the diamond shape that the factors important in global business competition make. He suggested that countries can come up with new factor advantages such as government support of its country’s economy, skilled labor, and robust technology industry. The model consists of elements such as factor conditions which constitutes different types of available resources in a country, demand conditions involving factors such as sophistication, market growth and market size, related industries and firm strategy, structure, and rivalry entailing competition. Below is a description of the determinants in Google and Old Mutual Company.

Source: Kharub and Sharma (2017)

Factor Conditions for Google

Research

Google Corporation largely invests in research activities as the only relevant way to solicit user feedback and enact informed decisions. The initiative enables the Company coming up with new products that better suit user’s preferences. The research expenses in 2015, 2016, and 2017 were $6.3 billion, $7.4 billion and $ 9.6 billion respectively (Smithson 2017, p. 1303). The figures also included stock-based reimbursement expenditure of $1.4 billion, $1.9 billion and $2.4 billion correspondingly.

Human Resources

Employees rank as vital assets in Google Company, by serving as a reason for continued success. The employee’s talent and energy boosts the Company’s performance. On January 1, 2017, the Company had 53,700 full-time employees: 7,657 in operations, 7,530 in general administrative, 17,640 in sales and marketing and 20,873 in research and development (Jarvis 2016, p.512). Competition for qualified personnel is usually high in the Company especially in technical staffs, computer scientists and software engineers.

Capital resources

The Company had $70.3 billion of cash as at January 1, 2017, marketable securities and cash equivalents (Kharub and Sharma 2017, p.133). Marketable securities and cash equivalents constituted time money market, time deposits and other funds such as corporate debt securities, debt instruments issued by municipalities in the United States government, debt instruments supplied by other countries and cash collateral received. 40 billion dollars of the 70.3 billion of cash, marketable securities, and cash parallels was seized by the company’s outside countries (Sutherland 2015, p.223). The Company purposed to reinvest the money in foreign countries. The source of company’s cash exudes from its reserves and advertisements.

Home Demand Conditions for Google

In the United States, demand for new technology gadgets and software applications is ever on an upward trajectory. Young children learn to use the gadgets at a tender age. Even the old are internet active. According to a research undertaken in 2013, more than 65% of the United States population use modern gadgets which can access internet connections (Smithson 2017, p. 1303). The advancement permits most people to access online platforms such as YouTube which is currently owned by Google. Also, myriad businesses in U.S have gone digital. Most advertisements are done online. Google Company chips in with its advertisement companies such as AdSense and DoubleClick. In a feat to reduce accidents, a huge number of people use Google maps daily to receive updates on traffics, weather and Jams.

Related and Support Industries for Google

In an era where the world is dependent and connected to each other, industries require support from other companies to achieve success. First, the increasing need to view the world maps, traffic and directions has benefited Google significantly. Google Maps aid connected users look up any location in the World. Although the views are mainly aerial, there exists street-level views for most cities. Google maps are rooted in business sites including real estate sites which customers can locate easily. Such constitutes one way through which Google earns money. Companies are required to pay a certain amount for inclusion in the Google Map Searches. In 2019, the Company predicts to have earned earn an additional $1.5 billion from Google Maps (Jarvis 2016, p.512).

Another company known as AdSense sells and advertises products through Google Sites. The outfit generates a considerable income. Google charges a fee when AdSense places interactive media, videos, images, and texts. AdSense generates 23% of Google Company income having been in use in around 14.5 million websites (Stross 2014, p.441). DoubleClick ranks as another advertising service focusing on an advertiser’s specific pages to stream in revenues by targeting customers. Website owners are also permitted to place ads on their sites. Double click works by showing the publisher the time visitors stay on the site and specific pages visited often. Google earns a revenue of $30.5 billion annually. Lastly, today, YouTube qualifies as a popular sited. The short adverts provides at the beginning of each video earns Google more than $9.6 billion every year (Stross 2014, p.441). Google dominates online video business videos. The adverts are a source of income although there is a main disadvantage since many people watch embedded YouTube videos not found on the site where ads are. YouTube exhibits good future hopes regarding dominating online video business. Hence Google stands to reap hugely from related and supporting industries.

Strategy, Structure, and Rivalry for Google

Google Company is situated in the Silicon Valley, a region referred to as land of high-tech businesses. The zone serves as the Company’s strong strategy. Google stands guided by one vital strategy that is innovation (Terry 2014, p.189). The company hunts against foreign IT firms using innovation as its weapon hence making it almost unbeatable. Structure primarily refers to owning business set ups. Robust ownership regulations and policies are of essence to industry in achieving sustainable growth. Such ensure that key people do not move their innovations and operations to other countries after benefiting from the Silicon Valley. Another factor that catalyzes national competitive benefit is rivalry. Rivalry among Google Company and other outfits like Facebook has led to birthing of positive results including constant innovation, improved quality and an increased experience to battle for markets in foreign markets (Soules 2015, p.103).

Google Company faces formidable competition from all business corners particularly from other companies which provide online and advertisements services. The firm contends with competition from providers of online products and services which avail information and answers to its users. However, Google fights back with improved services such as Google Docs and Gmail which competes directly with providers. Online advertising networks and platforms such as Facebook, AppNexus, and Criteo competes with the Google’s AdWords cited as the company’s auction-based advertising program (Soules 2015, p.103). Advertisements are also made on other platforms including Magazines, Billboards, Radio, and television which pose competition to the Company since it largely mains in online ads. Some e-commerce websites and Vertical search engines such as Amazon and eBay, Linkdln and Kayak also pose serious competition. A large number of users do not navigate through Google when accessing such platforms but instead access the sites directly.

Factor Conditions of the Old Mutual plc

Human and Physical resources

Old Mutual is international banking, insurance, savings, and banking group. It was established in South Africa 1845 and consisted of more than 19 million customers and assets worth $396 billion on December 31, 2017. Old Mutual has 68,530 employees in a study done in 2017, and its operating income is $617 million (Simons 2015, p.120).

Research Capabilities

In 2014, Old Mutual partnered with the Cambridge Institute of Sustainability Leadership, and the main aim was the identification of the key areas where the Company could make the most material impact (Rickembhezi 2013 p.55). The Company had launched the Positive Futures Plan which laid the aims of investing responsibly and also focusing improving the financial wellbeing which included financial education programs.

Home Demand Conditions for Old Mutual

Old Mutual plc was incepted in year 1845 in South Africa. The outfit became one of the largest diversified financial services groups in Southern Africa with an array of services such as asset management, short-term insurance, long-term savings and universal banking. There was a significant number of people in South Africa who were in need of health and life insurance. Also, South Africa being one of the largest African countries, ranks as among the most developed. A huge number of potential savers boosted the Old Mutual group. Old Mutual boasts over 19 million registered customers and a net income of Euros 1,258 million (Rickembhezi 2013 p.55). The Company can further develop new distribution channels and improve existing ones.

Related and Support Industries for Old Mutual

Nedbank

Old Mutual Company owns several companies which act as its support industries. The industries’ success bring forth advantages to Old Mutual since services offered are connected. For example, Nedbank Enterprise reported headline earnings of R5.5 billion which was an increase of 2% for only six months (Cho and Mun 2013, p.661). The figures interpret to IFRS post-tax profit attributable to the shareholders of the Old Mutual. The profit stands at around R3.1 billion. Earnings growth stood reinforced by robust net interest income and growth of non-interest income. As a result, Old Mutual plc received R1.6 billion of dividends in respect of its 54 percent ownership of Nedbank.

Strategy, Structure, and Rivalry for Old Mutual

The Old Mutual strategy entails delivering a modern, integrated wealth and asset management business. Old Mutual business combines investment solution cited as customer based, an end-to-end planning, investment management, high performing asset and financial advice. The corporation is indeed committed to operating the business in a responsible manner while promoting responsible investments through enabling financial wellbeing. The Company’s strategy focuses on enhancing growth of its asset management and investment competence (Riasi 2015 p.15). Such is actualized through Old Mutual Global Investors and advisor network expansion known as Quilter Cheviot to deliver investment answers aligned to the constantly dynamic preferences of financial advisers and customers. The Company owns a strategy that concentrates on continuing to provide quality services to current customers and as a result, improve protection proposition and maintains high levels of persistence. Through the strategy, the company stands to continue ripping benefits owing to being part of an integrated wealth management business (Colly, 2013, p.558).

Old Mutual faces competition from several enterprises including Standard Bank and Sanlam. The Standard Bank of South Africa Limited ranks as among South Africa’s vital monetary groups, running in more than 20 foreign countries in Africa and other main markets around the Globe. The firm is termed as Africa’s largest asset creditor hence making the corporation a rival of Old Mutual Group (Shartar 2016, p.311). On the Other hand, Sanlam is a financial services group also located in South Africa with its headquarters in Bellville. The outfit is listed on Namibian and Johannesburg Stock Exchange (Verhoef 2016 p.950). The group is an able competitor to the company considering that the firm has constantly registered growth since it was established in 1918 as a company covering life insurances. Sanlam operates in multiple countries such as India, Malaysia, Botswana and South Africa servicing more than 13 million clients (Tsiligiris 2018 p.215).

Conclusion

As acclaimed above, establishments employ Porter’s Diamond Model to recognize degree to which the set ups can shape home-based rewards towards securing competitive advantage. Such a model recognizes the strongholds of research which include factor conditions, home demand conditions, supporting industries and a company’s structure, strategy, as well as rivalry. For instance, the model reveals that Google Company possesses factor conditions such as knowledge, capital and research resources that propels the company to prosperity. The outfit is endowed with demand conditions such as business digitalization, supporting industries such as YouTube and AdSense and rivals including Facebook. Old Mutual has factor conditions such human resources comprising of experienced employees, demand conditions constituting of huge population in need of insurances, supporting industries such as Nedbank and rivals which include Sanlam and Standard Bank. Porter’s Diamond Model is useful in analyzing a company’s national market’s ability to productively compete in global markets. Corporates should integrate the model for self-evaluation.

Bibliography

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