By the early $1990$s Italian firms were by far the world leaders in the production and export of ceramic roofing and flooring tiles, accounting for over $30$ percent of would production and $60$ percent of world exports. The rise to global preeminence of the Italian tile industry was based on the superior mechanical and aesthetic qualities of Italian tiles. Italian tile production is concentrated in the Emilia$-$Romagna region of northern Italy around the small town of Sassuolo. In the Sassuolo region there are hundreds of firms involved in the ceramic tile industry and in various supporting industries such as the manufacture of glazes, enamels, and ceramic tile production equipment. As a result, Sassuolo boasts the greatest concentration in the world of firms in the ceramic tile and supporting industries.

The ceramic title industry in Sassuolo grew out of the earthenware and crockery industry, which could be traced to the $13$th century. Demand for ceramic tiles grew rapidly in Italy in the years immediately after the Second World War. Reconstruction after the war created a boom in the building industry. One reason for the high domestic demand was Italy$$s Mediterranean climate $($ceramic floor tiles were cool to the touch in warm weather$).$ There was also a tradition in Italy of using natural stone materials for flooring, as opposed to carpeting or wood. Because of this tradition, per capita tile consumption in Italy has long been the highest in the world. In $1987$ it stood at $3\mathrm{.}33$ square meters per capita, followed by $2\mathrm{.}55$ in Spain and $1\mathrm{.}81$ in Switzerland.

As a result of booming demand, the number of ceramic title firms in the Sassuolo region grew rapidly during the $1950$s and $1960$s$.$ In $1955$ there were $14$ title firms in the region; by $1962$ the figure had leaped to $102.$ In addition to booming demand, the low cost of setting up a ceramic tile business spurred this rapid growth in the number of enterprises. Rivalry between firms in the Sassuolo region was intense. They had to compete vigorously against each other to get access to retail outlets. Retailers demanded high quality, low cost, and aesthetically pleasing tiles. Firms constantly sought to gain an edge against each other in technology, design, and distribution. Innovations were usually known within a matter of weeks and quickly copied by rivals. Firms seeking a leadership position, whether that be in technology, or productive efficiency, or design, had to constantly improve their processes and turn over their product line in order to stay ahead of rivals.

As the industry grew around Sassuolo, process technicians from local tile companies left to start their own process equipment firms. Process equipment in tile making includes kilns for firing the tiles, presses for forming tiles, and glazing machines. By the mid$-1980$s more than $120$ firms in the Sassuolo area were making process equipment for ceramic tile companies. These equipment manufacturers completed fiercely for the business of tile manufacturers. In an attempt to gain business they devoted considerable effort to upgrading the quality of their production equipment and driving down their own manufacturing costs. One result of the competitive process among equipment suppliers was the development of a number of important process innovations that significantly lowered the energy and labor costs of manufacturing ceramic tiles. Advances in kiln technology in particular soon mad Sassuolo a leader not just in the tile industry but also in the supporting equipment industry.

By the $1970$s the tile industry in Italy was beginning to mature. The long post$-$WWII boom in the domestic demand was losing steam and excess capacity was beginning to develop among Italian tile firms. They responded to this problem by seeking international markets for their products, particularly in North America. In the international market the Sassuolo firms found they had a competitive advantage over their nearest competitors, who were typically from Spain and Germany. This advantage was based on higher productivity, lower costs, better design, and the Italian reputation for style. As a consequence, by the early $1990$s Italian firms enjoyed almost twice the global market share of their nearest competitors, the Spanish. $1,$ National Competitive Advantage: Porter$$s Diamond theory from the text should be used to work on this case.. List each attribute of the theory and explain whether Porter$$s Theory as given in the text applies or does not apply. Then succinctly in one sentence state why it would or would not apply according to the theory presented for Porter in the textbook. $($Why answer must be one sentence$)$ Clear analysis$/$understanding of Porter$$s Theory from text is essential.

$1.\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$applies does not $\_\_\_\_\_\_$

Why: