Country Competitiveness

Country Competitiveness:Definition

Competitiveness is a relative strength necessary to win in competition against industry rivals.

Country Competitiveness is the extent to which a country is capable of generating wealth, when measured against other countries, in world markets.

To be competitive, governments must create and sustain a domestic and international competitive environment that favors business operations and productivity in one or more industries.

Country Competitiveness and Impacts on MNEs

1. Country competitiveness affects an MNE’s selection of its global operations location.

2. Country competitiveness affects an MNE’s industry selection.

3. Country competitiveness affects an MNE’s innovation and capability building.

4. Country competitiveness affects an MNE’s global strategy.

Country Competitiveness:Determinants

Competitiveness improves when countries enhance their productivity capabilities.

They do this by establishing productivity-enhancing: 1. Country-level factors, 2. Firm-level factors, 3. Industry-level factors, and 4. Individual level factors.

Country Competitiveness:Determinants

Country Competitiveness: Country-Level Factors

Country-level determinants that raise competitiveness do so through the promotion of economic growth, stability, and productivity.

Building cultural, legal, political and social environments is done through:1. promoting economic soundness;2. world-class financial institutions;3. international culture and cultural acceptance; and4. the scientific, educational, and innovativeness

systems

Country Competitiveness: Country-Level Factors

Legal

Environment

Social

Environment

Politi

cal

Enviro

nmen

t

Cultu

ral

Enviro

nmen

t

Promoting Science, Education and Innovation

Technological innovation is a central to the process of raising productivity and thus improving country competitiveness.

Countries promote technological innovation through establishing institutions that make tech innovation more likely.

This is done by: developing basic scientific capability and R&D; supporting educational institutions that research; teach and support economic development; and supporting technological innovation through economic

and governmental policy.

Promoting Science, Education and Innovation

The level of technological innovation depends largely on the commercialization of new products and processes.

An effective commercialization process requires:i. Close interface between basic scientists and R&D

managers in the corporate world.ii. Strong support for developing intellectual

property rights in order to encourage enterprises to make large outlays in R&D activities before a product is introduced to market.

iii. The economy must be flexible enough to support the rapid adoption and diffusion of new technologies.

Promoting Science, Education and Innovation

Technological innovation can also be improved by adopting and assimilating technology from foreign country.

This can be done through:i. Attract investments from MNEs by bringing

advanced technological innovation into its country.

ii. Technology can be bought from foreign country , or licensed from a foreign patent holder for use in the borrowing country.

iii. Technology can be engineered by an adopting country and suitably modified by local engineers for domestics production and use.

Promoting Science, Education and Innovation

Education has become the prerequisite for entry into the knowledge-based economy, while technology has become the prerequisite for bringing education into society.

The executives of the twenty-first century require not only business savvy, but also strong technical, communication, project-management, and human resource management skills.

Promoting Economic Soundness

Countries try to develop sustainable economic growth potential.

They do this through creating policy that promotes investment, consumption, growth in real income, service and production sector performance, and infrastructure development.

Macroeconomic soundness concerns both economy growth and economy stability.

Economy stability is reflected in a low rate of inflation.

Promoting Economic Soundness

Promoting Finance

Countries try to develop financial sectors that invite international investment.

They do this through: managing appropriate currency valuation, promoting solvency in the banking systems,

and managing appropriate levels of short-term

external debt.

Promoting Finance

Promoting Internationalization

Promoting Internationalization:Openness

Promoting Internationalization:National Protectionism

Country Competitiveness: Industry-Level Factors

Country Competitiveness: Industry-Level Factors

Country level factors are necessary for international competitiveness, they aren’t sufficient.

It is necessary to also promote industry-level factors that promote competitiveness.

This industry-specific perspective is especially important for international managers because it is often a target country’s industrial, rather than national, environment that directly impacts firm decisions and operations.

Industry-Level Factors – Porter’s Framework

Porter (The Competitive Advantage of Nations) suggests there needs to be:1. Factor Conditions that support

competitiveness. 2. Demand Conditions that promotes

competitiveness. 3. Related and supporting industries that

promote efficiency and productivity growth. 4. Rivalry and business practice that

promotes development and competition.

Porter’s Framework:Factor Conditions

Factor Conditions are a nation’s position in terms of basic factors of land, labor, capital, and natural resources.

Each country may be abundant in certain factor but lacking in others.

It is likely to be higher in in industries in which the country has superior factors of production.

Examples include: Hungary – skilled labor. China – land and low-skill labor. Mexico – Cheap labor. Singapore – educated people, technology, transportation.

Porter’s Framework:Demand Conditions

Demand Conditions: strong market demand that promotes efficiency, productivity, and innovations.

It drives the GDP upwards and facilitate improvement of productivity in an competitive environment

Examples include: Japan produce quite air conditioning units powered by

energy saving to respond to the needs of Japanese consumer who live in small homes where humid summer are norms.

Porter’s Framework:Related and Supporting Industries

Related and Supporting Industries: the presence and support of complementary upstream and downstream, and related, firms.

Examples include: Suppliers Distributors Service firms Operations services

Porter’s Framework:Rivalry and Business Practice

Rivalry and Business Practice promotes the establishment of business strategy and structure that engages in international operations.

Some may select the location where the local rivalry is low

Strong local rivalry is powerful stimulus to the creations and persistence of national competitive advantage

Porter’s Framework:All together

The concept of Porter’s Framework promotes the facets of trade developments.

All the factors need to be present to some degree. When they are: economic growth better product development better information pressure to innovate and invest

Country Competitiveness: Firm-Level Factors

Country Competitiveness:Firm-Level Factors

Country level and industrial level factors exist to promote competitiveness.

Firm-level factors must also exist.

Country Competitiveness:Firm-Level Factors

Country Competitiveness: Individual-Level Factors

Country Competitiveness:Individual-Level Factors

Country level, industrial level, and firm-level factors exist to promote competitiveness.

Individual level factors must also exist.1. Entrepreneurial Skill: dev. New product, new market,

new business, new technology.2. Worker Talent: Skillful and diligent worker3. Engineering Ability: create value through production and

process innovation4. Managerial Ability: Experience and skillful managers5. Political Will: policy and administrative which is

supportive: south korea6. Educational Backgrounds: prime force for strengthening

education and science

Country Competitiveness:Government roles

Country Competitiveness:Government Factors

There are several principles that government should embrace in order to play a supporting role in Country competitiveness:

1. Emphasize competitive infrastructure: Education, science, research, transportation and IT

2. Enforce strict product, safety and environmental standards:

3. Product improvement, safety, environment control and respond to consumer demand and social demands.

4. Deregulate competitions: controlling entry , maintaining a state of monopoly

5. Adopt strong domestic antitrust policies: favor new entry over acquisitions

6. Goal-setting that leads to sustained investment: various policies.

CONCLUSIONS

Country Competitiveness:Putting It Together

This chapter is cumulative. To establish superior country competitiveness, one must promote all of the following:

THANK YOU