Competitiveness For Competitiveness For EntrepreneurEntrepreneur
Boston Industrial Model
The The EEmergence omergence of New Economyf New Economy
• Mass manufacturing Competition is Over
• Value of intangible assets
• Soft infrastructure critical
• Focus on activities not industries
CCreative reative EEconomy conomy Demand Knowledge, InnovationDemand Knowledge, Innovation
What is Competitiveness?
Political/Legal
Industry Environment
Demographic Economic
Technological
Global
CompetitiveEnvironment
Sociocultural
Components Of The Macro EnvironmentComponents Of The Macro Environment
Determinants of Productivity and Productivity Growth
Integration of Macro- and Microeconomic Reforms
Productivity and the Microeconomic Business Environment
What is Competitiveness?• Competitiveness is determined by the productivity with w
hich a nation uses its human, capital, and natural resources. Productivity sets a nation’s or region’s standard of living (wages, returns to capital, returns to natural resource endowments)– Productivity depends both on the value of products and services (e
.g. uniqueness, quality) as well as the efficiency with which they are produced
– It is not what industries a nation competes in that matters for prosperity, but how firms compete in those industries
– Productivity in a nation is a reflection of what both domestic and foreign firms choose to do in that location. The location of ownership is secondary for national prosperity
– The productivity of “local” industries is of fundamental importance to competitiveness, not just that of traded industries
– Devaluation does not make a country more competitive
Michael E. Porter
Competitiveness Is NOT…
• Abundant Natural Resources
• Cheap Labor
• Cheaper Currency
• Better Government “Incentives”
What is competitiveness ?
New Paradigm of Globalization New Paradigm of Globalization CompetitionCompetition
Source: Porter Competitiveness
Firm Strategy, Industry Structure
Related and Supporting
Industry
Market Demand
Global Floor
“ISO” Ceiling
Low Cost,Low Value
Trap
Labor Intensive
Labor Intensive
Vertical/SpecificIndustry
Vertical/SpecificIndustry
Labor Intensive
Labor Intensive
Supply
Collaboration Concepts
Competitiveness Is…
Intersection of Public Policy and Commercial Strategy
Strategy BEFORE Policy
PRIVATE
RESTRUCTURERESTRUCTURE
REPOSITIONREPOSITION
PUBLIC
Competitiveness Is…
Pursuing Effective Dialogue
• Individual Company• Ad-hoc Complaints• Operational Level• Laundry Lists• Anecdotal Evidence• Concessions• Opposite Sides
• Industry Clusters• Comprehensive Vision• Strategy • Priorities• Data and Analysis• Co-Responsibility• Same Side of Table
INEFFECTIVEINEFFECTIVE EFFECTIVEEFFECTIVE
Competitiveness Is…
Competitiveness Measurement
Competitiveness Evaluation
Competitiveness Cube
Understanding Competitiveness
Competitiveness MeasurementCompetitiveness Measurement
Competitiveness IndexesCompetitiveness Indexes
Competitiveness Ranking
Stages of Competitiveness Development
Competitiveness Theories
Threat of New Entry
Rivalry Among Existing Competitors
Bargaining Powerof Customers
Threat of Substitutes
Bargaining Powerof Suppliers
• Economies of scale• Proprietary product
differences• Brand identity• Switching costs
• Capital requirements• Access to distribution• Absolute cost advantages• Government policy• Expected retaliation
• Relative price performance of substitutes• Switching costs• Buyer propensity to substitute
• Industry growth• Fixed costs / value
added• Overcapacity• Product differences• Brand identity
• Switching costs• Concentration and balance• Informational complexity• Diversity of competitors• Corporate stakes• Exit barriers
• Differentiation of inputs• Switching costs• Presence of substitute
inputs• Supplier concentration• Importance of volume to
supplier• Cost relative to total
purchases• Impact of inputs on cost or
differentiation• Threat of forward
integration
• Buyer concentration• Buyer volume• Buyer switching costs• Buyer information• Ability to integrate
backward• Substitute products• Price / total purchases• Product differences• Brand identity• Impact of quality /
performance• Buyer profits
Porter’s Five ForcesPorter’s Five Forces
Source: Michael E. Porter, Competitive Advantage (New York: Free Press, 1985)
The Five Competitive ForcesThe Five Competitive Forces
Force Entry
Rivalry
Substitutes
Buyers
Suppliers
Erecting barriers (isolating mechanisms) create exploit economies of scale, aggressive deterrence, design in switching costs, etc.
Compete on nonprice dimensions: cost leadership, differentiation, cooperation, etc.
Improve attractiveness compared to substitutes: better service, more features, etc..
Reduce buyer uniqueness: forward integrate, differentiate product, new customers, etc..
Reduce supplier uniqueness: backward integrate, obtain minority position, second source, etc..
Porter’s Diamond ModelPorter’s Diamond Model
Diamond Model
Cluster
Customers
Firm
Suppliers
Competitors Complementors
A player is your complementor with respect to customers if customers value your product more when they have the other player’s product as well
A player is your competitor with respect to customers if customers value your product less when they have the other player’s product as well
A player is your complementor with respect to suppliers if it is more attractive for a supplier to provide resources to you when it is also supplying the other player
A player is your competitor with respect to suppliers if it is less attractive for a supplier to provide resources to you when it is also supplying the other player
Coopetition and theCoopetition and the Value NetValue Net
Source: Adam Brandenburger and Barry Nalebuff, Co-operation (New York: Currency Doubleday, 1996)
CLUSTER MAPS
Target Markets
Target MarketsSupporting
Industries
SupportingIndustries
Cluster DriverCluster Driver
Cluster FacilitatorCluster Facilitator
Core Cluster
The Collaborative The Collaborative Competitiveness DevelopmentCompetitiveness Development
Competitiveness Directions
The Eight Questions• How wired is your country?• How fast is your country?• Is your country harvesting it’s knowledge?• How much does your country weigh?• Does your country dare to be open?• How good is your country at making friends?• Does your country’s management get it?• How good is your country’s brand?
Friedman’s “Eight Habits of Highly Effective Countries”
• Is R&D Advantage?
• “high tech”industries Advantage?
• Cheap Labor?
• Abundance Resources?
Questions For New Business?
• Entreprenue is – Innovation– Strategic Management System Thinking– Collaboration– Financial tools– Commercialization, etc.
Directions
Enright’s Meso Model
Enright’s Market FailuresEnright’s Market Failures
• Impacted Information
• Managerial Myopia
• Under-provision of public goods
• Coordinate Failure
Innovation AccessInnovation Access
Extreme SpecializationExtreme Specialization
Information SpilloversInformation Spillovers
Faster Innovation AdoptersFaster Innovation Adopters
Easy Access to
Resources
Easy Access to
ResourcesFlexibility and
Rapid Response
Flexibility and
Rapid Response
Limitated FacilitatesLimitated Facilitates
The Sources Advantage of the Firms
ActivitiesActivities ResourcesResources
KnowledgeKnowledge
Enright 2002
Leap Frog(Innovation Driven)
• PProductroduct Innovation Innovation• PProcesrocess Innovations Innovation• Business Model InnovationBusiness Model Innovation• Breakthrough InnovationBreakthrough Innovation
ClustersClusters
Cluster ConceptsCluster Concepts
Cluster ISCluster IS
• “A cluster is a geographically proximate group of companies and associated institutions in a particular field, linked by commonalities and complementarities.“
Michael E. Porter.
Cluster ValuesCluster Values
• Competitive strategy is about being different.
• It deliberately chooses a different set of activities to deliver a unique mix of value
Michael E. Porter.
And, cluster is not just an And, cluster is not just an alliancealliance
Examples: CExamples: Ceramic eramic TTile ile CCompanies ompanies and and SSuppliers in uppliers in 30 KM.30 KM. RRadiusadius
Cluster StrategyCluster Strategy
• Organic Cluster Strategies
• Transplant Cluster Strategies
• Hybrid Strategies
Cluster RequirementsCluster Requirements
• A direct dialog with the cluster firms to better understanding of the industry needs.
• Create awareness of existing support programs to firms and associations in the industry.
• Designing tailor made support for the industry.• Involving private sector in their financing and ma
nagement.• Coordination within different Government depart
ments to support the industry.
FFoster oster CCluster luster DDevelopmentevelopment
STATISTICAL OBSERVATION
INDUSTRY STUDIES
FIRMS FORAE(Dialog)
CHANGE MANAGEMENT+
-
Italy ClustersItaly Clusters
USA ClustersUSA Clusters
Cluster MapsCluster Maps
Clusters must be evoluing by private and public influrencing actions
Organization NetworkOrganization Network
Business Improvement For SME
Clustering
• Scottish Enterprise Model
• Dulch’s 9 Steps
• Cluster Initiative Performance Model (CIPM)
New Strategy
Working GroupMeetings
Organize ClusterWorking Groups
ActionGroup:Define Vision,Key Themes
Working Group Co-ChairsParticipants
Working Group Co-ChairsParticipants
Initiative Team
Initiative Team
Initiative Team
Initiative Team
Initiative Team
Initiative Team
Cross-CuttingInitiative Teams
Broad Vision, Strategy, Initiatives
Key Themes
New Business Propositions and Enabling Actions for Each Theme
Scottish Enterprise Methods
Mobilise Diagnose Collaborate Implement
Scottish Tourism
• One to three hours from our main markets which are the central belt of Scotland and the North of England
• 6pm in the city by 8pm relaxing in the Scottish Borders
• Quiet Roads in the Scottish Borders
Duch’s 9 Step
Methods
ObjectivesObjectives
Impacting the leaders will initiate the change
Methodology
Cluster Drive
Survival
Cluster Motivation
CIPM Model
Cluster Lifecycle
Cluster Actors
Objective Checklist
Target Area of Activity