Topic : Country Competitiveness
Topic
Country Competitiveness
International Business
topic: Country Competitiveness
Do You Know?
• Why do countries differ in their overall competitiveness?
• Why is a country’s competitiveness more salient in some industries?
• What roles should firms and individuals play in shaping country competitiveness?
• How does a foreign country’s competitiveness influence the MNEs?
Topic : Country Competitiveness
Defining Country Competitiveness
• 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.
Topic : Country Competitiveness
Defining Country Competitiveness
• Productivity is important to competitiveness.• Productivity is the value of the output by a
unit of labor or capital.• It is the prime determinant of a country’s
standard of living, and the main source of national income.
• Productivity depends on the quality and features of products and the efficiency with which they are produced.
• Productivity does not come from what a country has, but from how it uses those resources.
Chapter 5: Country Competitiveness
Country Competitiveness and MNEs
• The following contribute to country competitiveness:– Government policies, national values, national
culture, economic structures, economic and governmental institutions, and national histories
• Nations have become influential in international business operations.
• Most governments have institutions that promote economic development by marketing competitiveness factors to Multinational Enterprises.
Topic : Country Competitiveness
Country Competitiveness and MNEs
• Examples of governmental promotion include:– Italy’s promotion of resources, histories,
and capabilities for shoe and leather production.
– Japanese promotion of culture, history, and capabilities in semiconductor and electronics production.
– Swedish promotion of history and culture related to concern for people and product safety.
Topic : Country Competitiveness
Country Competitiveness and MNEs
• Country competitiveness affects selection for operations locations.
• Competitiveness impacts the industry selection of an MNE.
• Competitiveness affects MNE innovation capacity and capability production.
• Competitiveness affects MNE global strategy.
Topic : Country Competitiveness
Country-Level Determinants
• Competitiveness improves when countries enhance their productivity capabilities, driven by the following factors:– Country-level– Industry-level– Firm-level– Individual-
• Country-level fundamentals include:– Science, education, and innovation– Economic soundness– Finance– Internationalization
Chapter 5: Country Competitiveness
Country-Level Determinants
Exhibit 5-1: Determinants of country competitiveness
Chapter 5: Country Competitiveness
Country-Level Determinants
Exhibit 5-2: Country-level determinants of country competitiveness
Topic : Country Competitiveness
Science, Education, and Innovation
• 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– Supporting technological innovation through
economic and governmental policy.
Chapter 5: Country Competitiveness
Macroeconomic 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.
• Essentially, they promote consumption, investment, government spending and net exports in order to build economic stability favoring international economic growth.
Chapter 5: Country Competitiveness
Macroeconomic Soundness
Exhibit 5-3: The strength of macro-level domestic economy (Top 20)
Topic : Country Competitiveness
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– Managing appropriate levels of short-term
external debt
Topic : Country Competitiveness
Internationalization
• Internationalization refers to the extent to which a country participates in international trade and investment.
• Promoting internationalization is done through:– Building positive export balances– Establishing workable exchange rate systems– Building financial and direct investment– Keeping high foreign exchange reserves– Promoting economic and cultural openness
Chapter 5: Country Competitiveness
Internationalization
• Openness refers to the ease of which resources, goods, services, people, labor, technology, information and capital flow across boundaries.
• In order to promote openness– Countries seek to negotiate lower trade
barriers and protectionism,– While promoting cultural acceptance of
“global mindsets” among the population
Chapter 5: Country Competitiveness
Industry-Level Determinants
• Four broad attributes constitute national advantage– Factor Conditions
• The nation’s position in factors of production, including labor, capital, land, and natural resources.
• The nation’s position in more sophisticated factors, such as skilled workforce, scientific base, infrastructure and information
– Demand Conditions• The nature of market demand for the industry’s
product or service.
topic : Country Competitiveness
Industry-Level Determinants
• Four broad attributes constitute national advantage– Related and Supporting Industries
• The presence and support of a nation’s suppliers or other related industries
• Cluster – when suppliers, manufacturers and distributors are located near each other
– Rivalry and Business Practice• The nature of domestic rivalry in addition to the
conditions governing how business are organized, managed and operated in a country
Topic : Country Competitiveness
Industry-Level Determinants
Exhibit : Industry-level determinants of country competitiveness
topic: Country Competitiveness
Industry-Level Determinants
Exhibit : The microeconomic competitiveness scoreboard (Top 20)
topic: Country Competitiveness
Firm-Level Determinants
• These strategies, principles, or approaches differentiate one country’s firms from those of others.
• Include technological innovation and organizing principles.
• Inevitably diffused across nations and imitated by foreign rivals.
Chapter 5: Country Competitiveness
Firm-Level Determinants
Exhibit 5-6: Firm-level determinants of country competitiveness
Chapter 5: Country Competitiveness
Individual-Level Determinants
• People or human resources associated with country competitiveness:– Workers– Entrepreneurs– Managers– Engineers– Educators– Politicians– Interplay of the Four-Level Determinants
Topic : Country Competitiveness
Individual-Level Determinants
Exhibit : Individual-level determinants of country competitiveness
Topic : Country Competitiveness
Government Role
• Governments can affect country competitiveness– Policy making and intervention– Trade liberalization and exchange rate
adjustment
• Industrial policies – all forms of coordinated government interventions to promote industrial development:– Import protection, financial subsidies,
regulatory changes, training and infrastructure policies
Topic : Country Competitiveness
Government Role
• To play a supporting role in national competitiveness, governments should:– Emphasize competitiveness infrastructure– Enforce strict product, safety, and
environmental standards– Deregulate competition– Adopt strong domestic antitrust policies– Boost goal-setting that leads to sustained
investment
Country Competitiveness: Putting it Together
This chapter is cumulative. To establish superior country competitiveness, one must promote all of the following:
Country Level Competitiveness Industry Level Competitiveness Firm Level Competitiveness Individual Level Competitiveness Government Policy That Supports The Above, And Is
Acceptable To The Population.
Country Competitiveness: Putting it Together
THIS IS ALL TOUGHER THAN IT LOOKS!! Can you imagine why??