Bulgarian CompetitivenessB d 2000Beyond 2000
Presentation by
Kevin X. MurphyP id tPresidentJ.E. Austin AssociatesOctober 2000
Bulgarian CompetitivenessB d 2000Beyond 2000
Presentation by
Martin WebberVi P id tVice PresidentJ.E. Austin AssociatesOctober 2000
Outline of the Presentationf
Importance of CompetitivenessWhat is Competitivenessat s Co pet t e essCompetitiveness Business Strategy-Implications of the DiamondImplications of the DiamondLook at the Microenvironment of BusinessI l ti C titiImplementing Competitiveness
Purpose of Initial Visitp f
1. Present Tools of Competitiveness
2. Share Examples from Other Countries
3. Discuss Relevancy to Bulgaria
Why is Competitiveness Emerging as the #1 I f L d ?Issue for Leaders?
GlobalizationLib li tiLiberalizationPrivatizationWTO/Regional Trade AgreementsTechnological ChangeTechnological ChangeUrgent for Transition Economies
Globalization: Victors or Victims?Globalization Is Not Optional. Why?
Pace of Change Has AcceleratedPace of Change Has Accelerated.Technology Is Driving Change.WTO Setting Global Trade Rules.Financial Markets Lift or Bring Down Nations.Achieving Competitiveness Is Key ToAchieving Competitiveness Is Key To Security.Not Size of Missiles but Speed of CComputers.We Compete with Our Imagination, Not Locks and Keys. (N. Negroponte, MIT)y ( g p , )
Source: Thomas Friedman, The Lexus and the Olive Tree, 1999
J. E. Austin Bulgaria’s Competitiveness B h kBenchmarks
Sector Percentile RankSector Percentile Rank
COMPOSITE AVERAGE 52%Human Resource and Workforce Competitiveness 65%Infrastructure 64%Science and Technology Competitiveness 58%Science and Technology Competitiveness 58%Policy Environment 51%Investment Competitiveness 52%Fi i l S t 31%Financial Sector 31%Export Competitiveness and Tourism 41%Economic Performance 69%
Where is Bulgaria on the Map of C i i ?Competitiveness?
Indicator 1997 1999d cato 99 999GDP Growth (ranked by % Growth) -7.0% 2.4%Exports/Capita $537 US $481 USExport % of GDP 61% 44%Export % of GDP 61% 44%ICRG Risk Rating 76.6 71Overall Budget Deficit -15.4 1.50%GDP I li it D fl t (I fl ti ) 109 00% 0 4%GDP Implicit Deflator (Inflation) 109.00% 0.4%FDI as % of GDP 4.9% 6.3%FDI - Privatization as % of GDP 3.1% 4.4%
Source: World Bank Indicators World Bank 2000 and Bulgaria National Bank
Telephone Density (fixed lines per 1,000 people) 323 329Human Development Index 0.758HDI Value 0.772HDI Value
Source: World Bank Indicators, World Bank 2000 and Bulgaria National Bank.
Is Bulgaria Attracting F i Di I ?Foreign Direct Investment?
Share of FDI/
CountryFDI in US$ Millions
Population Millions
World Population
Share of Global FDI
FDI per capita
Population Ratio
Percentile Rank
Singapore $10 326 3 164 0 05% 0 78% 3264 20 14 43 95Singapore $10,326 3.164 0.05% 0.78% 3264.20 14.43 95Ireland $4,038 3.705 0.06% 0.30% 1089.88 4.82 88Spain $32,539 39.371 0.67% 2.45% 826.47 3.65 83Czech Republic $2 609 10 295 0 18% 0 20% 253 42 1 12 75Czech Republic $2,609 10.295 0.18% 0.20% 253.42 1.12 75Hungary $2,414 10.114 0.17% 0.18% 238.72 1.06 73Romania $2,040 22.503 0.38% 0.15% 90.65 0.40 53
$ 0 26 42Macedonia, FYR $118 2.010 0.03% 0.01% 58.52 0.26 42Bulgaria $401 8.257 0.14% 0.03% 48.61 0.21 37
Source: World Bank, 2000.
Economist’s E-business Readiness Ranking
Ranks a country’s infrastructure for E-Business based on:Business based on:
• Connectivity• Literacy rates• State of the telephone network• Teledensity
Di l t• Dial up costs• The general business environment
Selected E-business Rankings0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0
US
Singapore
Ireland
France
JapanJapan
Poland
Greece
Indonesia
BULGARIARomania
Philippines
India
Pakistan
Euro-E-Business Ratings0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0
Sweden
UK
I l dIreland
France
PolandPoland
Hungary
Czech Republic
Greece
Slovakia
Turkey
BulgariaRomania
Ukraine
ICOR Investment/Output Ratio 1995-1998p
H K EstoniaGDI as % of GDP
Hong KongHungary
Bulgaria 1980-1990
Estonia
Singapore PolandSlovenia Lithuania
20%
gTurkey
Spain Croatia Latvia
Greece IrelandGreece Ireland
Bulgaria 98Bulgaria 95-98 (-2.5)
Romania (-6)
Sierra Leone
17:1 6:1 2:1
( )
17:1 6:1 2:1
GDI/GDP as % of GDP Growth
What is Competitiveness?p
Dependency on Natural Resources and GNP Per Capita
Percentage of Exports in Natural Resources and GNP Per Capita in 1998
$35 000
$30,000
$35,000
United States
Sw itzerland
$20,000
$25,000
Australia
Singapore
Netherlands Canada
Sw eden
$10,000
$15,000
Chile
Argentina
South Africa
$0
$5,000
0 10 20 30 40 50 60 70 80 90
VenezuelaBulgaria
Russian FederationPeru
Trinidad and Tobago
EgyptBolivia
ColombiaRomania
China
0 10 20 30 40 50 60 70 80 90Percentage of exports in raw materials calculated as the percentage of merchandise exports in agricultural raw materials, metals and ores, and fuels.Source: World Development Report 2000.
Selected Global Commodity Prices 1960 1999 (1990 100)
400
WheatSoybean Oil1960-1999 (1990=100)
200
300
Soybean Oil
Source: World Bank Development Indicators
0
100
1960 1965 1970 1975 1980 1985 1990 1995 1997 1998 1999
CopperIron 1960 1965 1970 1975 1980 1985 1990 1995 1997 1998 1999
Sugar
4,000
5,000
6,000
7,000
Copper
T bB fDownward Trend in 0
1,000
2,000
3,000
1960 1965 1970 1975 1980 1985 1990 1995 1997 1998 19991960 1965 1970 1975 1980 1985 1990 1995 1997 1998 1999
1960 1965 1970 1975 1980 1985 1990 1995 1997 1998 1999
6,000
8,000
10,000
400
600
TobaccoBeef Commodities Prices
0
2,000
4,000
1960 1965 1970 1975 1980 1985 1990 1995 1997 1998 19990
200
1 2 3 4 5 6 7 8 9 10 11
Textile Industry Wages
$20 00
$25.00
Hourly Labor Wage
(U.S.$)
$15.00
$20.00
( )
$5.00
$10.00
$0.00
Japa
nan
ceIta
lyU.SSpa
insra
elaiw
anKore
aRicaex
icoRep.
vado
ray
siamaladu
rasail
and
ragua
China
Haiti
ades
hkis
tanne
sia
Jap
Fra It U Sp Isr Taiw
South
KoCos
ta R
Mex
Domini
can R
El Salv
aMala
yGua
temHon
duTh
aila
Nicarag Ch H
Bangla
dPak
isInd
one
Low cost strategies based on low cost wages provide an unstable competitive advantageSOURCE: Bobbin Magazine 1999 averages,developed countries statistics are from Gherzi Textile Organization
Dangers of Factor Driven Strategies Wage GrowthTextile Industry Wages
25
30
15
201990
1993Hourly Labor Wage
(U.S.$)
5
10
( )
0
Japa
n
Fran
ce
Italy
U.S
Spa
in
Isra
el
Taiw
an
Hon
g K
ong
Por
tuga
l
outh
Kor
ea
Mex
ico
Arg
entin
a
Col
ombi
a
Mor
occo
Thai
land
Egy
pt
Indi
a
Pak
ista
n
Chi
na P
R
Per
u
H S
CAGR1980-93 19.2% 8.9% 0.1% 5.0% 0.9% 2.9% 8.1% 8.0% 10.4% 4.3% 9.8% 20.2% 2.6% 4.7% 5.1% 4.1% 8.2% -8.0% 4.1% -0.9%
Low cost strategies based on low cost wages provide an unstable competitive advantageSOURCE: Monitor Company and Gherzi Textile Organization
The Productivity of LaborThe Productivity of Labor
Value Added per Person EmployedValue Added per Person Employed
$50,000
$60,000
$20,000
$30,000
$40,000
USD
$0
$10,000
and xico azil bia hile ela gal rea
ece wanand tria ark den Ita
ly ain alia ada
and ong ium tes
Thaila
nMex
icBraz
Colombi
Chil
Venezue
l
Portuga
South Kore
GreecTaiwa
FinlanAus
tri
Denmar
Swede Ita Spa
Austra
li
CanadIre
lan
Hong Kong
Belgium
United State
Source ILO 1998 and 1997 data
Hourly Compensation (USD)
$25.00
$30.00
$20.00
$25.00
$15.00
$5.00
$10.00
USD 0.65
$0.00
Lank
aul
garia
Mex
ico
ortu
gal
Chin
aTa
iwan
hKo
rea
Gre
ece
Spai
nIre
land
ngdo
mus
tralia
Cana
daIta
lyFr
ance
Stat
esJa
pan
erla
nds
Finl
and
Aust
riaen
mar
kSw
eden
elgi
umer
land
sze
rland
erm
any
Sri Bu M Po
Hong
Kon
g, T
Sout
h G IUn
ited
Kin
Au C FUn
ited
S
Neth
e F A
Den
Sw BeNe
the
Switz
Wes
t Ger
Source: ILO, Bulgaria estimate based on the Economist Intelligence Unit
The Tourism TrappDependency on Charter OperatorsStruggle to Manage ImageFailure to Capture High V lValueEasily Replicable StrategyStrategyLow Wage Rates Persist
Competitiveness is NOT…C p O
Abundant Natural ResourcesAbundant Natural ResourcesCheap LaborCheaper CurrencyBetter Government “Incentives”Better Government “Incentives”
Definition of Competitivenessf f p
Sustainable Growth in Productivity yDriven by:
Quality of business strategy and operations which is affected by:
Macroeconomic environment
Microeconomic environment
The New Competitiveness ParadigmSource: Michael Porter, 1998,
Political, Legal, and Macroeconomic ContextPolitical, Legal, and Macroeconomic Context
Sophistication Sophistication of Company of Company
Operations andOperations and
Quality of the Quality of the Microeconomic Microeconomic
BusinessBusinessOperations and Operations and StrategyStrategy
Business Business EnvironmentEnvironment
Microeconomic FoundationsMicroeconomic FoundationsMicroeconomic FoundationsMicroeconomic Foundations
The Competitive DiamondS Mi h l P tSource: Michael Porter
Strategy, Strategy, StructureStructure& Rivalry& Rivalry
Gov't
FactorsFactors DemandDemand
The ClusterThe Cluster
Fairbanks’ 7 Opportunities
1. Improve Customer Learning2 Explore Forward Integration2. Explore Forward Integration3. Innovate4 Cooperate with Cluster4. Cooperate with Cluster5. Understand Competitive Position6 Avoid Over Reliance Basic Factors6. Avoid Over-Reliance-Basic Factors7. Avoid Government Paternalism
SOURCE:Plowing the Sea
The Competitive DiamondF i b k ’ O t itiFairbanks’ Opportunities
Strategy, Strategy, StructureStructure& Ri l& Ri l
Gov't
& Rivalry& Rivalry
Know Your Relative Competitive PositionKnow When and When Not to Forward
Integrate
Avoid Paternalism
FactorsFactors DemandDemand
g
Avoid Overreliance on Basic Factors of Advantage
Improve Understanding of Customers
Overcome Defensiveness
The ClusterThe Cluster
Improve Interfirm Cooperationp p
DEMAND
Strategy, Strategy, StructureStructure& Rivalry& Rivalry
Gov'tDirect Contact with sophisticated and
demanding consumersSize and segmentation of local demand
FactorsFactors
gNumber of independent buyersThe speed of growthHow fast the home market gets saturated
The ClusterThe Cluster
Internet savvy customersMobile local buyersAbility to monitor and respond to trends
Examples: Italian Shoes, Israeli Fish, Southern Rainbow
Exploring Forward Integration: E l C t Fl V l S tExample: Cut Flower Value System
180.0154 2
Net Revenue Per Rose Stem for Each Component of Value System
120.0
140.0
160.0
51 4
154.2
U.S.
14.60 0
80.0
100.0
23.4
17.0
51.4
25.7
Cents
14.6
20.0
40.0
60.0
0.0Grower
(Bogota)Air Freight(Bogota-Miami)
Broker(Miami)
GroundTransport
(Miami-Boston)
Wholesaler(Boston)
Retailer(Boston)
Boston)
Source:Monitor Company, based on Interviews in Mexico, Colombia, Miami, Boston, Monitor Analysis
FACTORS
St tSt t Gov't
BASIC-Climate
Strategy, Strategy, StructureStructure& Rivalry& Rivalry
Gov t-Fertile Land-Location Proximity-Availability of basic inputsSt bl d h lth l i l diti
DemandDemand
-Stable and healthy ecological conditions-Labor Force
ADVANCEDKnowledge resources
The ClusterThe Cluster
-Knowledge resources-Access to capital resources-Infrastructure: availability of ports-Research capabilityp y-Tele-density-Management and Technology
Examples: Honduran Textiles, DR Tourism, Sri Lanka Gems