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MANAGEMENT of

The Key to Competitiveness and Wealth Creation

TECHNOLOGY

Tarek Khalil | Ravi Shankar

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Competitiveness

07

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INDIA’S COMPETITIVENESS: A FEW INDICATORS

• Nations have to compete with one another because world markets are now quite open

• Dependence on other countries is due to uneven distribution of natural resources, wealth, technology, and human capability

• In the Global Competitiveness Report 2011–2012, Switzerland tops the overall rankings followed by Singapore (2nd), Sweden (3rd), Finland (4th), United States (5th), Germany (6th), the Netherlands (7th), Denmark (8th), Japan (9th) and the United Kingdom (10th). Few other rankings are: China (26th), Thailand (39th), Sri Lanka (52nd), Brazil (53rd), India (56th), Vietnam (65th), Pakistan (118th), and Nepal (125th)

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DEFINITIONS AND INDICATORS OF COMPETITIVENESS

• Competitiveness is the process by which one entity strives to outperform another

• At the macro level, the competitiveness of nations reflects the standard of living of their citizens

• National competitiveness is a consolidation of the micro level performances of companies and individuals—the true agents of economic growth

• The fall of communism, the trend toward democracy, the opening of the market and military spending have created a new environment for business

• The Washington-based U.S. Council on Competitiveness adopted this definition and depicted the determining factors of competitiveness as a four-section pyramid

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DEFINITIONS AND INDICATORS OF COMPETITIVENESS (Contd.)

The Competitiveness

Pyramid

Source: Based on Council on Competitiveness, 1995

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MANAGEMENT OF TECHNOLOGY AND GLOBAL

COMPETITIVENESS• At the macro level, countries must be able to:

– Create an economic growth policy– Provide an infrastructure permitting the support of

technological enterprises and the facilitation of commerce and trade

– Encourage cooperation between government, industry, and education and research institutions

– Energize and support technological innovation and develop plans to enhance creativity and support R&D activity

– Promulgate necessary but unburdensome legislation and regulation measures to protect the environment and strengthen social structure

• In the past, national competitive advantage focused on the availability and successful exploitation of raw materials, labour, transportation, and sources of capital

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MANAGEMENT OF TECHNOLOGY AND GLOBAL COMPETITIVENESS

(Contd.)• The National Academy of Engineering’s Committee on

Engineering as an International Enterprise concluded that the comparative strength of a nation’s technical enterprise depends upon the following factors (Lee and Reid, 1991):– The strength of the national research enterprise– The quality of technical education– The presence of a large pool of technical talents– The strength of information technology infrastructure– The ability to cultivate individual creativity and initiative– Synergy between basic research and downstream technical

activities– The scale of domestic markets and the openness of global

markets as engines for innovation and its commercialization

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MANAGEMENT OF TECHNOLOGY AND GLOBAL COMPETITIVENESS

(Contd.)• The National Academy of Engineering’s Committee on

Engineering as an International Enterprise concluded that the comparative strength of a nation’s technical enterprise depends upon the following factors (Lee and Reid, 1991):– The ability to continually modernize plant and equipment

Collaboration between industries and universities and the government

– National savings and the level of investment in industrial modernisation

– National policy supporting initiatives to enhance adoption, adaptation, and diffusion of technology and related know-how

– The development of the necessary human, physical, financial, regulatory, and institutional infrastructures

– Public support of generic and domestically developed technologies

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MANAGEMENT OF TECHNOLOGY AND GLOBAL COMPETITIVENESS

(Contd.)• The National Academy of Engineering’s Committee on

Engineering as an International Enterprise concluded that the comparative strength of a nation’s technical enterprise depends upon the following factors (Lee and Reid, 1991):– The ability to continually modernize plant and equipment

Collaboration between industries and universities and the government

– National savings and the level of investment in industrial modernisation

– National policy supporting initiatives to enhance adoption, adaptation, and diffusion of technology and related know-how

– The development of the necessary human, physical, financial, regulatory, and institutional infrastructures

– Public support of generic and domestically developed technologies

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MANAGEMENT OF TECHNOLOGY AND GLOBAL COMPETITIVENESS

(Contd.)• The Case of Japan

– Factors contributing to Japan’s success include:• Thoughtful strategic planning

• The planned transfer of technology

• Targeting of niche products and markets

• Teamwork and excellent execution

• Commitment and the desire to win

– In the automotive industry, Japan observed that the quality of American cars could be improved to provide better customer satisfaction

– Japanese industry, although helped by the global economic situation, did what had to be done: compete in process technologies with techniques such as KANBAN, Single Method Die Exchange (SMDE), and statistical process control

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MANAGEMENT OF TECHNOLOGY AND GLOBAL COMPETITIVENESS

(Contd.)• The Case of Japan

– Japan was able to consolidate several important ingredients for technology development: strategic planning, know-how, and collaboration between institutions

– A sound strategy for cooperation was formulated by the Ministry of International Trade and Industry (MITI) (Cheney and Grimes, 1991)

– The required know-how was provided by cooperating universities and industries while the capital was provided by strong conglomerates known as kereitsus

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MANAGEMENT OF TECHNOLOGY AND GLOBAL COMPETITIVENESS

(Contd.)• The Case of Singapore

– Poh-Kam Wong (1995) three main problems facing them:

• A small domestic market• Limited natural resources• A limited supply of indigenous human resources

– Wong (1995) mentions three strategic approaches that Singapore used in overcoming these problems:

• Serving as a regional business service hub for other nearby nations

• Engaging in niche specialisation

• Acting as a home base and R&D hub for global firms

– All of these approaches are based on acquiring technologies from outside the country

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MANAGEMENT OF TECHNOLOGY AND GLOBAL COMPETITIVENESS

(Contd.)• The Case of Singapore

– After the initial success of Singapore’s economic development strategy, another shift in Singapore’s plans took place

– The government is now putting emphasis on promoting innovation and creativity in design and services along the entire business-value chain

– The shift from being a technology user to being a technology innovator is a more advanced step in an economic development strategy

– Singapore’s spectacular success in economic development provides a good model of a successful national strategy in a small, young, yet growing nation

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.A COMPARISON OF

INTERNATIONAL COMPETITIVENESS: ECONOMIC

INDICATORS• The economic performance of a nation is commonly expressed in terms of its gross domestic product

• This index reflects the wealth created within the borders of a nation and represents the output (total market value) produced by people, firms, and governments domestically

• The GDP index is different from the GNP index, which measures output produced by citizens of a country either within or outside the borders of that country

• The GDP index is becoming a more commonly used index because it correlates well with many other economic indicators, such as industrial production and employment

• GDP can be adjusted for inflation to produce another index, called real GDP

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THE U.S. COUNCIL ON COMPETITIVENESS

• Standard-of-Living Indexes - A more representative index for the standard of living is purchasing power parity (PPP)

• Trade Indexes - A trade balance represents the difference between the total value of merchandise goods and services exported by a country and the total value of merchandise goods and services imported

• Productivity Indexes - Reflects the efficiency of an operation

• Investment Indexes - Investment in R&D, plant and equipment (P&E), and education provides a base for long-term economic growth

• Patents Index - Patents reflect innovativeness or a country’s ability to create technology

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EMERGENCE OF THE TIGERS

• Global competition intensified in the mid-1980s with the emergence of a host of newly industrialized countries (NICs) that became known as 'the Tigers‘

• The infusion of foreign direct investment (FDI) into newly industrialized and developing countries, combined with those countries’ support for better education and their push for technology transfer, resulted in higher rates of real growth in their wealth than the rates in industrialized countries

• Countries with developing economies have succeeded in penetrating global markets and have increased their share of wealth

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COMPETITIVENESS: THE GAME OF NATIONS

A Few Past and Recent Ranking of Countries’ Competitiveness

NB. The scores are

actually indices (0 to

100) generated for the

unique purpose of

constructing charts

and graphics

Source: IMD

International,

1999, 2011.

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COMPETITIVENESS: THE GAME OF NATIONS (Contd.)

• The following are some MOT guidelines for improving and sustaining a nation’s competitive position in the global arena:– A nation must first have a stable political system that

permits economic growth– Develop strong institutions to foster proactive

involvement in the development, transfer, and implementation of technology

– Develop strong financial institutions capable of supporting sustained technical progress

– Strengthen educational and training systems that permit citizens to move up the knowledge ladder

– Develop technology strategy and support generic critical technologies

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COMPETITIVENESS: THE GAME OF NATIONS (Contd.)

• The following are some MOT guidelines for improving and sustaining a nation’s competitive position in the global arena:– Support R&D activities

– Encourage creativity and entrepreneurship

– Vigorously participate in international debates on technological as well as trade issues

– Predict the social and environmental consequences of technology and develop appropriate public policies to deal with them

– Develop strategic alliances with compatible countries to enhance technological progress and strengthen trade partnerships

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COMPETITIVENESS OF FIRMS: THE MICRO LEVEL (Contd.)

• At the firm level, management must develop a strategy for competing. Some are:– Offer products or services desired by a customer

– Rely on innovation to introduce new products or services

– Achieve technological superiority in (a) products, (b) process, (c) service, and (d) marketing

– Concentrate on quality of product or service

– Reduce cost and/or price

– Be first to market

– Reduce the product development cycle’s time from concept to market

– Create and target niche markets for products

– Eliminate waste

– Build in flexibility to change

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COMPETITIVENESS OF FIRMS: THE MICRO LEVEL

• To become or to remain competitive, firms must be able to:– Develop a culture in which the value of technology as a strategic

competitive weapon is fully appreciated

– Understand the dynamics of the process of technological innovation.

– Monitor and forecast technological changes

– Develop and adopt effective methodologies to measure the impact of new technologies on their business

– Facilitate the implementation of new technologies in their operations and build the infrastructure or migrating from one technology to another

– Prepare, train, and hire the proper workforce to implement the new technology

– Develop an organizational structure that permits effective and efficient implementation of technological changes

– Develop an appropriate reward system for employees and managers

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COMPETITIVENESS OF FIRMS: THE MICRO LEVEL

(Contd.)• At the firm level, management must develop a strategy for

competing. Some are:– Improve efficiency

– Improve customer service

– Promote creativity and entrepreneurial spirit

– Develop and harness employee knowledge and talents

– Follow a progressive culture for the organization

– Encourage teamwork

– Introduce a progressive management style

– Enhance the ability to forecast

– Sharpen the ability to plan

– Focus on increasing market share

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COMPETITIVENESS OF FIRMS: THE MICRO LEVEL

(Contd.)• Competitive firms can be recognised by a set of characteristics:

– Profitable

– Stable

– Capable of leading in innovation and technology

– Has ability to maintain or increase market share

– Capable of developing and introducing innovation in a timely manner

– Is a pacesetter, often setting industry standards

– Has an ability to utilize technology and to capture market share through products, process, information systems, or service innovation

– Has the ability to match its strengths with targeted market needs better than other companies can

– Aggressive in its desire to reach planned goals

– Flexible

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COMPETITIVENESS OF FIRMS: THE MICRO LEVEL

(Contd.)• Competitive firms can be recognised by a set of

characteristics:– Progressive

– Fair

– Knowledgeable about its core technology

– Knowledgeable about its strengths and weaknesses

– Knowledgeable about its competitors

– Has visionary leaders

– Knows how to fully utilize the capability of its employees

– Motivates and rewards employees appropriately

– Knowledgeable about the technology and business life cycles and knows when to hold and when to fold new projects

– Knowledgeable about its social, political, and legal environment

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WEBLINK

• http://www.imd.org/research/publications/wcy/upload/20years.pdf