The method(s) used for analyzing the information:

For the purpose of this research, the author chose to work with “Michael Porter’s Model of Competitiveness” to analyze the information. Porter’s “Diamond Analysis” and the “Five Forces” models were selected because these models provide an outstanding framework that explores and illustrates very comprehensively the various angles of competitiveness in the industry. Using the Porter’s model, based on the information available, the National Diamond – the four broad attributes, e.g. the factor conditions, the demand conditions, the related and supporting industries, and the firm strategy, structure, and rivalry in a nation that individually and as a system constitute the national advantage of a nation – is illustrated. Each of the four determinants is discussed in relation to the marble industry in sufficient details. Consequently, the marble industry Cluster Diamond and Cluster Map are developed, which provide illustrative information to the reader. The Diamond diagram and the Cluster Map have also been accompanied with narratives that further analyze the industry. Following the National Diamond, Cluster Diamond, and the Cluster Map, the industry has been analyzed in accordance with Porter’s ‘Five Forces,’ e.g. the suppliers force, the buyers force, the new entrants force, the substitute products

force, and the rivalry force among the existing firms. Each of the five forces has been analyzed separately in regard to the Afghan marble industry. Based on all these analyses conclusions have been drawn and recommendations made.

Overview of Porter’s Diamond Analysis: Michael Porter of Harvard University offers a model that can help understand the national competitiveness of a country and its comparative position in the global economy. He argues that the national competitiveness of a nation does not rely on the factors that many believe at. It is not a macroeconomic phenomenon driven by variables such as exchange rates, interest rates, and government deficits. Neither it is a function of cheap and abundant labor, nor is it connected to the bountiful natural resources of a territory. He believes that “the only meaningful concept of competitiveness at the national level is ‘productivity.’ The principle goal of a nation is to produce a high and rising standard of living for its citizens. The ability to do so depends on the productivity with which a nation’s labor and capital are employed.” “A nation’s standard of living depends on the capacity of its companies to achieve high levels of productivity and to increase productivity over time. Sustained productivity growth requires that an economy continually upgrade itself.” (Porter, 1998) Porter adds that “no nation can be competitive in everything. The idea is to deploy the nation’s limited pool of human and other resources into the most productive uses. Even those nations with the highest standards of living have many industries in which local companies are uncompetitive.” For a country to be competitive then the question is to find out “determinants of productivity and the rate of productivity growth” and more importantly finding the particular fields/industries that the country’s success in productivity is related. Porter has identified four attributes that individually and as a system determine and constitute the diamond of national advantage for a country. These attributes are:

- Factor conditions: the nation’s position in factors of production, such as skilled labor or infrastructure, necessary to compete in a given industry;

- Demand conditions: the nature of home-market demand for the industry’s product or service;

- Related and supporting industries: the presence or absence in the nation of supplier

industries and other related industries that are internationally competitive;

- Firm strategy, structure, and rivalry: the conditions in the nation governing how

companies are created organized and managed, as well as the nature of domestic rivalry.

Furthermore, Porter introduces the concept of ‘Clusters’ that helps to illustrate a particular industry and its links with all the other relevant and interconnected industries on the ground. “Clusters are geographic concentrations of interconnected companies, specialized suppliers, service providers, firms in related industries, and associated institutions in particular fields that compete but also cooperate” (Porter, 1998). Clusters are very helpful in understanding an industry and then the ‘Diamond’ for a cluster is even more helpful to understand the determinants of productivity in a particular cluster. Porter also introduced a framework that models an industry as being influenced by five forces. The model is called the “Porter’s Five Forces Model.” These forces are the power of suppliers, the power of buyers, the power of new entrants, the power of substitute products, and the power of rivalry amongst the existing players. Analysis of all these forces along with the cluster and the national Diamond gives a very comprehensive understanding and illustration of any industry in a particular geographic territory. The subsequent sections in this chapter analyze Afghanistan’s marble industry cluster competitiveness based on these models.