ACCA Strategic Business Leader (SBL) Practice Exam

When should Porter's Diamond model be employed?

1. When analyzing product life cycles

2. To assess the attractiveness of a country

3. In evaluating direct competitors

4. During financial risk assessment

The correct answer is: To assess the attractiveness of a country

Porter's Diamond model is specifically designed to assess the competitiveness of nations and regions in global markets. It systematically analyzes factors that contribute to a country's or a region's ability to develop competitive advantages in specific industries. The model considers four main attributes: factor conditions, demand conditions, related and supporting industries, and firm strategy, structure, and rivalry, which influence how domestic companies compete in the international arena. Using this model allows businesses and policymakers to understand the strengths and limitations of a particular location for business activities. This insight is essential for making informed decisions regarding international business expansion, foreign direct investment, or understanding competitive dynamics in various markets. The other choices do not align with the purpose of the Diamond model; analyzing product life cycles would require a different strategic framework focused on lifecycle stages rather than national competitiveness. Evaluating direct competitors involves a focus on industry competition and market dynamics, which does not encompass the broader geographical considerations of the Diamond model. Financial risk assessment is primarily concerned with evaluating risks associated with financial activities and investments, which is not the purpose of the Diamond framework.