Vinod Anand | 14 Dec 2011

The most important reason for the micro-cluster-, products- and country focus discussed above, was to enable international comparisons.


The most important reason for the micro-cluster, products and country focus discussed above, was to enable international comparisons. These comparisons were undertaken on two levels, the country “diamond” level and the company specific product cost and process level.


The reason for the “national diamond” comparisons between countries was to identify the competitive platform that the national environments of each of the selected countries provided to their industries. It was hoped that an analysis of these “diamond” conditions will illustrate to South African companies and policy makers how their environment must be developed to promote competitive downstream and more sophisticated industries, based on Porter’s theory.
The intention was not to attempt replicating the conditions in those countries, rather to learn from their experience, to develop and adjust to the conditions unique to South Africa.

Each industry has a unique set of key success factors (KSF5) that are required to enable that specific industry to be globally competitive. Likewise, unique “diamond” conditions are required for each industry, to provide a platform for continuous innovation and upgrading. The “diamond” benchmarking exercises represent an effort to determine the nature of the domestic “diamond’, to, through international comparison, construct an “ideal” diamond and to identify the gaps between the South African and so-called ideal conditions. The gaps indicate issues in the national ‘diamond” that need to be addressed to enable the “diamond” to become a mutually reinforcing system that continuously upgrades and amplifies the forces of competitive advantage in the industry and its environment.

A questionnaire, that reflects Porter’s theory, was developed to ensure that the issues around the “diamond are adequately addressed and that comparable information would be available for the different benchmark countries arid companies.
However, it is important to try and focus on those factors that are the most critical to the competitive success of an industry or where upgrading will have the most significant impact on competitiveness, of each cluster as far as possible, to avoid getting lost in analytical detail.


Initial efforts to develop the South African and respective “Best-in-practice” and “Emerging Best “diamonds” resulted in vague, unsubstantiated descriptions of the conditions prevalent in each of the benchmark countries. For example, statements such as South African raw material is more expensive, infrastructure is good and labour is less expensive were common. However, it was difficult to quantify the differences between South Africa and the “Best-in-Practice” countries, and to get some sense as to the relative impact of these issues on the ability of the country to compete.
Consequently, cost and process benchmarking exercises were introduced to determine South Africa’s relative competitive position in the selected products versus that of the benchmark countries. Furthermore, the benchmarking exercises illustrate where and how many South African companies and their supporting industries must improve.
The drivers of the cost of efficiency differences, i.e. those issues that can be managed to drive costs down and to increase quality or efficiency, that were highlighted in the benchmarking exercises, are feedback to substantiate the key issues in the diamond that contributes to the different performances in the various companies and countries.

To be able to gauge the competitive ability of any industry within a nation, one need to understand the key success factors within that industry that enable it to compete. A company can compete by either being less expensive, or by offering a differentiating product. Irrespective of the cost- or differentiation focus of the company, superior profitability can only be demonstrated when compared to that of the company’s competitors. A very effective method for doing such an analysis is through benchmarking. Benchmarking is a rigorous process for tying strategy development to industry and competitive analysis. It is a method for:

• Measuring the performance of your ‘best-in-practice’ competitors relative to your industry’s key success factors.

•D determining how the “best-in-practice” achieve those performance levels; and

• Using that data as a basis for your own company’s targets, strategies and implementation ([DC, 1992).

A successful benchmarking analysis typically includes seven steps ([DC, 1992). These are:

• Determining which functional areas within your operation are to be benchmarked, i.e. which functions represent the highest percentage of cost, play the greatest role in differentiating competitors in the marketplace, have the greatest room for improvement and are capable of improvement.

• Identifying the key factors and variables with which to measure the above identified functions (commonly referred to as the cost or differentiation drivers).

• Selecting the “best-in-practice” companies for each item to be benchmarked.

• Measuring the performance of the “best-in-practice” companies for each benchmark variable.

• Measuring your own performance for each variable and determining the gap between your company and the “best-in-practice”.

• Specifying programmes and actions to meet and surpass the competition, and

• Implementing these programmes by setting specific improvement targets and deadlines, and by developing and monitoring progress to review and update the analysis over time.