The Competitive Advantage of South Afric PDF

The Competitive Advantage
of South Africa
Professor Michael E. Porter

Institute for Strategy and Competitiveness
Harvard Business School
Johannesburg, South Africa

June 9, 2003
This presentation draws on ideas from Professor Porters articles and books, in particular, The Competitive Advantage of Nations (The Free Press,
1990), Building the Microeconomic Foundations of Competitiveness, in The Global Competitiveness Report 2002, (World Economic Forum, 2002),
Clusters and the New Competitive Agenda for Companies and Governments in On Competition (Harvard Business School Press, 1998), and
ongoing research on clusters and competitiveness. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any
form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the permission of Michael E. Porter.
Further information on Professor Porters work and the Institute for Strategy and Competitiveness is available at www.isc.hbs.edu
CAON South Africa 2003 06-09-03 CK.ppt 1 Copyright 2003 Professor Michael E. Porter
Perspectives on Firm Success
Internal External
Competitive advantage Competitive advantage (or

resides solely inside a disadvantage) resides partly in
company or in its the locations at which a
industry companys business units are
based
Competitive success Cluster participation is an
depends primarily on important contributor to
company choices competitiveness
What is Competitiveness?
Competitiveness is determined by the productivity with which a nation uses its

human, capital, and natural resources. Productivity sets a nations or regions
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
Nations compete in offering the most productive environment for business

The public and private sectors play different but interrelated roles in creating a
productive economy
Innovation and Competitiveness
Prosperity
Prosperity
Productivity
Productivity Competitiveness
Innovative
Innovative Capacity
Capacity
Innovation is more than just scientific discovery

There are no low-tech industries, only low-tech firms
South African Competitiveness 2003
Economic growth has been sluggish since the late 1990s;

registered employment has fallen since 1990
GDP per capita growth is lagging other middle and low income
countries
Government is increasingly recognizing the need for

microeconomic reform and a greater focus on business
development
Internationally, trade agreements with African neighbors, the

United States, and the European Union create new opportunities
Comparative Economic Performance
Selected Sub-Saharan African Economies over Time
Growth Rate of Real

GDP per Capita (PPP) Countries sorted by
1990 2002 CAGR of
Real GDP per Capita:
10%
Mauritius
Uganda
5% Botswana
Ghana
Namibia
Senegal
0%
Tanzania
South Africa
Nigeria
-5%
Gabon
Cameroon
Kenya
-10% Cote d'Ivoire
Zambia
Zimbabwe
-15%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Source: EIU 2003

Selected Middle- and Lower-Income Economies
GDP per Capita,

2001, US=100
40%
Hungary
Argentina
Slovak Republic
30% Mauritius
Estonia
South Africa Chile Poland
(30%, +4.3%)
Uruguay Russia Mexico
Malaysia Croatia
Costa Rica
Brazil Lithuania Botswana Latvia
Thailand Romania (22%, +3.7%)
20%
Namibia Tunisia
Colombia Bulgaria Turkey Dominican Rep.
Venezuela Peru
El Salvador
Jordan Ukraine
Jamaica Philippines Morocco
10% Guatemala Sri Lanka China
Ecuador Indonesia (12%, +4.5%)
Honduras Bolivia Nicaragua India
Vietnam
Haiti Nigeria
0%
-4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0%
CAGR of GDP per Capita Relative to the

US, 1995-2001
Source: World Development Indicators 2002

South African Microeconomic Performance
South Africa has one of the highest levels of prosperity (GDP per
capita) and labor productivity in Africa
However
South Africas competitive position is clearly eroding
South Africa has registered only slow labor productivity growth in
the last few years, falling behind many other African economies
South Africas world export market share has been flat over the
last decade despite the devaluation of the Rand
South Africa has low domestic investment and low inflows of
foreign direct investment
A new approach to economic development will be necessary
Comparative Labor Productivity Performance
Labor Productivity
Selected Middle Income Economies
(Real GDP per Employee),
2002
$25,000
Argentina
$20,000
Croatia
Chile
Trinidad & Tobago Hungary
$15,000 Uruguay
Mexico
Brazil Malaysia Poland
Slovakia Mauritius
$10,000 South Africa Estonia
Costa Rica
Russia Lithuania
$5,000
$0
-2% -1% 0% 1% 2% 3% 4% 5% 6% 7%
Change of Labor Productivity, CAGR, 1995-2002
South Africas labor productivity growth has been low and lagged all but the
South American economies in its income group
Source: EIU 2003
South African Export Performance
World export
share in %
World Export Market Shares
0.60%
0.50%
0.40%
Goods
0.30% Services
Total
0.20%
0.10%
0.00%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
South Africas world market share has been flat over the last decade. Export growth
has been driven by growing world trade volumes and long-term devaluation
Source: WTO (2002)
Comparative Inward Foreign Investment
Selected Middle-Income Economies
FDI Stocks as % of GDP, Ecuador
Average 1998-2000* Namibia Chile
(52%, 16%) (51%, 28%) (61%, 35%)
50%
Nigeria
40%
South Africa Malaysia
Brazil
Costa Rica
30% Mozambique
Africa Vietnam Argentina
Honduras
20% Peru Venezuela
Morocco Mexico
Colombia
Philippines Mauritius
Uruguay Thailand
10%
0%
0% 5% 10% 15% 20% 25% 30%
FDI Inflows as % of Gross Fixed Capital Formation, Average 1998-2000
South Africa has a relatively high stock of foreign direct investment, but inflows have
been small in recent years
Note: For African countries only 2000 data available
Source: World Investment Report 2002
Determinants of Productivity and Productivity Growth
Macroeconomic,
Macroeconomic, Political,
Political, Legal,
Legal, and
and Social
Social
Context
Context for
for Development
Development
Microeconomic
Microeconomic Foundations
Foundations of
of Development
Development
Sophistication
Sophistication Quality
Qualityof
ofthe
the
of
ofCompany
Company Microeconomic
Microeconomic
Operations
Operationsand
and Business
Business
Strategy
Strategy Environment
Environment
A sound macroeconomic, political, legal, and social context creates the

potential for competitiveness, but is not sufficient
Competitiveness ultimately depends on improving the microeconomic
capability of the economy and the sophistication of local companies and
local competition
Integration of Macro- and Microeconomic Reforms
Stability and confidence support

investment and upgrading
Macro reform
alone leads
Micro reform
to short term Create the opportunity Required to achieve
for productivity productivity is impeded
capital
by macro
inflows
economic
and Macroeconomic Microeconomic
volatility
growth reform reform that
spurts
reduces
that
company
ultimately
investment
are not
sustainable Productivity growth allows economic
growth and rising incomes without
inflation, making macroeconomic
stability easier to achieve
Productivity and the Business Environment
Context
Context for
for
Firm
Firm
Strategy
Strategy
and
and Rivalry
Rivalry
z A local context and rules that
encourage investment and
sustained upgrading
Factor e.g., Intellectual property
Factor Demand
(Input) protection Demand
(Input) Conditions
Conditions z Meritocratic incentive systems Conditions
Conditions across all major institutions
z Open and vigorous competition
z Presence of high quality, among locally based rivals z Sophisticated and demanding
specialized inputs available local customer(s)
to firms z Local customer needs that
Human resources anticipate those elsewhere
Capital resources Related
Related andand z Unusual local demand in
Physical infrastructure Supporting
Supporting specialized segments that can be
Administrative infrastructure Industries
Industries served nationally and globally
Information infrastructure
Scientific and technological z Access to capable, locally based suppliers
infrastructure and firms in related fields
Natural resources z Presence of clusters instead of isolated
industries
Successful economic development is a process of successive economic upgrading, in which

the business environment in a nation evolves to support and encourage increasingly
sophisticated ways of competing
The California Wine Cluster Winemaking
Winemaking
Equipment
Equipment
Grapestock
Grapestock Barrels
Barrels
State Government Agencies
(e.g., Select Committee on Wine
Production and Economy)
Fertilizer,
Fertilizer, Pesticides,
Pesticides, Bottles
Bottles
Herbicides
Herbicides
Grape Caps
Caps and
and Corks
Corks
Grape Harvesting
Harvesting
Equipment
Equipment
Labels
Labels
Irrigation
Irrigation Technology
Technology Wineries/Processing
Wineries/Processing
Growers/Vineyards
Growers/Vineyards Facilities
Facilities Public
Public Relations
Relations and
and
Advertising
Advertising
Specialized
SpecializedPublications
Publications
(e.g.,
(e.g.,Wine
WineSpectator,
Spectator,
Trade
TradeJournal)
Journal)
California
California Educational,
Educational, Research,
Research, && Trade
Trade Tourism
Tourism Cluster
Cluster
Agricultural
Agricultural Cluster
Cluster Organizations
Organizations (e.g.
(e.g. Wine
Wine Institute,
Institute,
UC
UC Davis,
Davis, Culinary
Culinary Institutes)
Institutes)
Food
Food Cluster
Cluster
Sources: California Wine Institute, Internet search, California State Legislature. Based on research by MBA
1997 students R. Alexander, R. Arney, N. Black, E. Frost, and A. Shivananda.
The Houston Oil and Gas Cluster
Upstream Downstream
Oil Oil Oil

Oil Oil Oil
Oil & Natural Oil & Natural Trans- Wholesale Retail
Trading Refining Distribution Marketing
Gas Gas portation Marketing
Exploration & Completion &
Gas
Development Production Gas Gas Gas
Transmis-
Gas Gas
Gathering Processing Trading sion
Distribution Marketing
Oilfield Services/Engineering & Contracting Firms
Specialized
Equipment Business
Technology Subcontractors
Suppliers Services
Services
(e.g. Surveying,
(e.g. Oil Field Chemicals, (e.g. MIS Services,
(e.g. Drilling Consultants, Mud Logging,
Drilling Rigs, Technology Licenses,
Reservoir Services, Maintenance Services)
Drill Tools) Risk Management)
Laboratory Analysis)
Specialized Institutions
(e.g. Academic Institutions, Training Centers, Industry Associations)
Clusters and Competitiveness
Clusters increase productivity and efficiency

Efficient access to specialized inputs, services, employees, information, institutions, and
public goods (e.g. training programs)
Ease of coordination and transactions across firms
Rapid diffusion of best practices
Ongoing, visible performance comparisons and strong incentives to improve vs. local
rivals
Clusters stimulate and enable innovation

Enhanced ability to perceive innovation opportunities
Presence of multiple suppliers and institutions to assist in knowledge creation
Ease of experimentation given locally available resources
Clusters facilitate commercialization

Opportunities for new companies and new lines of established business are more
apparent
Commercializing new products and starting new companies is easier because of available
skills, suppliers, etc.
Clusters reflect the fundamental influence of externalities / linkages

across firms and associated institutions in competition
Levels of Clusters
There is often an array of clusters in a given field in different locations,

each with different levels of specialization and sophistication
Global innovation centers, such as Silicon Valley in semiconductors, are

few in number. If there are multiple innovation centers, they normally
specialize in different market segments
Other clusters focus on manufacturing, outsourced service functions, or

play the role of regional production, assembly or service centers
Firms based in the most advanced clusters often seed or enhance

clusters in other locations in order to reduce the risk of a single site,
access lower cost inputs, or better serve particular regional markets
The challenge for an economy is to move from isolated firms to an array

of clusters, enhance interaction within clusters, and then to upgrade the
breadth and sophistication of clusters to more advanced activities
Leading Footwear Clusters
Romania
Portugal
Production subsidiaries
Production
of Italian companies
Focus on short-
Focus on lower to
production runs in the
medium price range
medium price range
Italy
Design, marketing,
and production of
premium shoes
Export widely to the
world market
United States Vietnam/Indonesia

Design and marketing OEM Production
Focus on specific market China Focus on the low cost
segments like sport and OEM Production segment mainly for the
recreational shoes and boots Focus on low cost European market
Manufacturing only in segment mainly for the
selected lines such as hand- US market
sewn casual shoes and boots
Source: Research by HBS student teams in 2002

Institutions for Collaboration
General
General Institutions for collaboration (IFC) are formal
and informal organizations that
Chambers
Chambers of of Commerce
Commerce - facilitate the exchange of information
Professional
Professional associations
associations and technology
School
School networks
networks - conduct joint activities
University
University partner
partner groups
groups - foster coordination among firms
Religious
Religious networks
networks
Joint
Joint private/public
private/public advisory
advisory IFCs can improve the business environment
councils
councils by
Competitiveness
Competitiveness councils
councils - creating relationships and level of trust
that make them more effective
- defining of common standards
Cluster-specific
Cluster-specific - conducting or facilitating the organization
Industry
Industry associations
associations of collective action in areas such as
procurement, information gathering, or
Specialized
Specialized professional
professional
international marketing
associations
associations and
and societies
societies
Alumni - defining and communicating common
Alumni groups
groups of
of core
core cluster
cluster
companies beliefs and attitudes
companies
Incubators - providing mechanisms to develop a
Incubators
common economic or cluster agenda
Stages Of Competitive Development
Factor -Driven
Factor-Driven Investment
Investment-- Innovation
Innovation--
Economy
Economy Driven
Driven Economy
Economy Driven
Driven Economy
Economy
Low Cost Efficiency Through Unique

Inputs Heavy Domestic and Value
Foreign Investment
Source: Porter, Michael E., The Competitive Advantage of Nations,

The Free Press: New York (1990)
South Africas Competitiveness Agenda 2003
Upgrade the business environment
Foster cluster development
Shift the roles of government and business in economic

development
Integrate social and economic policies
Create economic strategies at the provincial level
Lead a cross-national economic strategy for Southern Africa
The South African Business Environment
Selected Observations
Context
Context for
for
Firm
Firm
Strategy
Strategy
and
and Rivalry
Rivalry
+ Increasing openness to
international competition
Factor
Factor + Low corruption Demand
Demand
(Input)
(Input) Uncertainty about economic Conditions
Conditions
Conditions
Conditions policy context (e.g., BEE)
Slow progress on privatization
+ Huge endowments of and other market reforms
natural resources (ore, gold, Low sophistication
diamonds, coal) of domestic
+ Capable financial markets Related
Related and
and consumers
Supporting
Supporting
+ Strong physical infrastructure
Industries
Industries
Skill deficits in the workforce
Decreasing spending on
R&D Presence of many but unsophisticated
suppliers due to history of economic sanctions
Few developed clusters like mining, tourism,
and financial services
Factor
Factor
(Input)
(Input) Factor (Input) Conditions
Conditions
Conditions South Africas Relative Position
Competitive Advantages Competitive Disadvantages

Relative to GDP per Capita Relative to GDP per Capita
Country Ranking, Arrows Country Ranking, Arrows
indicate a change of 5 or more indicate a change of 5 or more
ranks since 1998 ranks since 1998
Financial Market Sophistication 13 Quality of Math and Science Education 71

Local Equity Market Access 16 Availability of Scientists and Engineers 65
Adequacy of Public Sector Legal Recourse 17 Police Protection of Businesses 59
University/Industry Research Collaboration 18 Telephone/Fax Infrastructure Quality 58
Intellectual Property Protection 19 Extent of Bureaucratic Red Tape 53
Judicial Independence 20 Quality of Public Schools 50
Quality of Management Schools 20 Cell phones per 100 people (2001) 44
Air Transport Infrastructure Quality 21 Internet users per 100 people (2001) 44
Quality of Scientific Research Institutions 21 Ease of Access to Loans 34
Overall Infrastructure Quality 24 Port Infrastructure Quality 31
Railroad Infrastructure Quality 25
Note: Rank by countries; overall South Africa ranks 29 out of 80 countries (33 on National Business Environment, 37 on GDP pc 2001)
Source: Global Competitiveness Report 2002
Factor
Factor
(Input)
(Input)
Conditions
Conditions
International Patenting Output
Annual U.S. patents
Selected Middle Income Countries
per 1 million
population, 2001
7
6 Hungary
4
South Africa
3 = 200
Russia patents
2 Croatia Argentina Malaysia granted in
1990-2001
Lithuania
1 Costa Rica Chile
Brazil Mexico
0 Poland
-5% 0% 5% 15% 25% 35%
Compound annual growth rate of US-registered patents, 1995 - 2001
Source: US Patent and Trademark Office (www.uspto.gov). Authors analysis.

Factor
Factor
(Input)
(Input)
U.S. Patenting by South African Institutions
Conditions
Conditions
Organization Patents Issued from 1996 to 2001

1 DENEL (PROPRIETARY) LIMITED 11
2 SASOL TECHNOLOGY (PROPRIETARY) LIMITED 10
3 WATER RESEARCH COMMISSION 9
3 CIRCUIT BREAKER INDUSTRIES LIMITED 9
3 ATOMIC ENERGY CORPORATION OF SOUTH AFRICA 9
6 IMPLICO B.V. 8
6 CSIR 8
8 ESKOM 7
8 BRITISH TECHNOLOGY GROUP LIMITED 7
10 FARMARC NEDERLAND B.V. 5
10 AE + CI LIMITED 5
12 IPCOR NV 4
12 MICROCHIP TECHNOLOGY INCORPORATED 4
12 WINDSOR TECHNOLOGIES LIMITED 4
12 MINTEK 4
12 BILLITON SA LIMITED 4
12 SCORPIO CONVEYOR PRODUCTS LIMITED 4
12 SLIC TRADING COMPANY LIMITED 4
12 ELECTRO CHEMICAL HOLDINGS SOCIETE ANONYME 4
12 UNIVERSITY OF PRETORIA 4
12 H L & H TIMBER PRODUCTS (PROPRIETARY) LIMITED 4
22 EUROPEAN SPORTS MERCHANDISING BV 3
22 L'AIR LIQUIDE 3
22 AECI EXPLOSIVES LIMITED 3
22 PRESS ENGINEERING PTY. LTD. 3
Note: Shading indicates universities, research institutions, and other government agencies. Nine more institutions with three patents are not listed.
Source: US Patent and Trademark Office (www.uspto.gov). Authors analysis.
Context
Contextfor
Firm
for
Strategy
Firm Strategy Context for Firm Strategy and Rivalry
and
andRivalry
Rivalry South Africas Relative Position

Extent of Distortive Government Subsidies 9 Cooperation in Labor-Employer Relations 70

Efficacy of Corporate Boards 12 Decentralization of Corporate Activity 47
Effectiveness of Anti-Trust Policy 22 Favoritism in Decisions of Government 39
Officials
Extent of Locally Based Competitors 23
Tariff Liberalization 35
Costs of Other Firms' Illegal/ 25
Unfair Activities
Intensity of Local Competition 25
Demand
Demand
Conditions
Demand Conditions
Conditions
South Africas Relative Position

Consumer Adoption of Latest Products 48

Government Procurement of Advanced 41
Technology Products
Laws Relating to Information Technology 39
Buyer Sophistication 38
Stringency of Environmental Regulations 37
Presence of Demanding Regulatory 34
Standards
Related
Relatedand
and
Supporting
Supporting Related and Supporting Industries
Industries
Industries South Africas Relative Position


Local Availability of Components 13 Local Availability of Specialized 44

and Parts Research and Training Services
Extent of Product and Process 27 State of Cluster Development 35
Collaboration
Local Availability of Process Machinery 33
Local Supplier Quantity 28
Local Supplier Quality 30
South Africa needed to produce many supplies domestically to overcome trade

sanctions but did not develop deep clusters
Company Operations and Strategy
South Africas Relative Position 2002

Prevalence of Foreign Technology 6 Nature of Competitive Advantage 68

Licensing
Value Chain Presence 65
Reliance on Professional Management 13
Degree of Customer Orientation 61
Extent of Incentive Compensation 15
Extent of Branding 51
Extent of Marketing 18
Capacity for Innovation 43
Willingness to Delegate Authority 23
Production Process Sophistication 38
Company Spending on R&D 27
Control of International Distribution 36
Extent of Regional Sales 28
Breadth of International Markets 31
Extent of Staff Training 28
Note: Rank by countries; overall the South Africa ranks 29 out of 80 countries (31 on Company Operations and Strategy, 37 on GDP pc 2001)

development
South Africas Export Performance By Broad Sector
1997-2001
South Africas average change in
World Export Share, world goods export share:
2001 + 0.07%
2.5%
Materials/Metals Personal (Diamonds)

2.0% (3.6%, +1.3%)
1.5%
Multiple Business
1.0%
Food/ Defense
Beverages South Africas
average goods
0.5% Housing/ export share:
Textiles/Apparel
Household 0.52%
Transportation Petroleum/Chemicals
Power D
D = $1 billion
0.0% Health Care
Office export volume
-0.3% -0.1% + 0.2% + 0.4% + 0.6% +0.8% in 2000
Change in South Africas World Export Share, 1997 - 2001
South Africas exports continue to be dominated by natural resource-intensive products

Source: UNCTAD Trade Data. Authors analysis.
The Australian Wine Cluster
Trade Performance
Australian Wine Australian Wine

Exports in million US World Export Market
Dollars Share
$1,000 8%
$900
7%
$800
6%
$700
5%
$600
Value
$500 4%
Market Share
$400
3%
$300
2%
$200
1%
$100
$0 0%
1995 1996 1997 1998 1999 2000
Source: UN Trade Statistics

History
1930 1965 1980 1991 to 1998

First oenology Australian Wine Australian Wine New organizations
course at Bureau and Brandy created for education,
Roseworthy established Corporation research, market
Agricultural established 1990 information, and
College 1955 1970 export promotions
Winemakers
Australian Wine Winemaking Federation of
Research school at Charles Australia
Institute founded Sturt University established
founded
1950s 1960s 1970s 1980s 1990s

Import of Recruiting of Continued inflow Creation of Surge in exports
European winery experienced of foreign capital large number and international
technology foreign investors, and of new wineries acquisitions
e.g. Wolf Bass management
Source: Michael E. Porter and rjan Slvell, The Australian Wine Cluster Supplement, Harvard Business School Case Study, 2002
Recently founded Institutions for Collaboration
Winemakers
Winemakers Federation
Federation of
of Australia
Australia Cooperative
Cooperative Centre
Centre for
for Viticulture
Viticulture
zz Established
Established in
in 1990
1990 zz Established
Established in
in 1991
1991
zz Focus:
Focus: Public
Public policy
policy representation
representation of
of companies
companies zz Focus:
Focus: Coordination
Coordination of
of research
research and
and education
education
in
in the
the wine
wine cluster
cluster policy
policy in
in viticulture
viticulture
zz Funding:
Funding: Member
Member companies
companies zz Funding:
Funding: other
other cluster
cluster organizations
organizations
Australian
Australian Wine
Wine Export
Export Council
Council Grape
Grape and
and Wine
Wine R&D
R&D Corporation
Corporation
zz Established
Established in
in 1992
1992 zz Established
Established in
in 1991
1991 as
as statutory
statutory body
body
zz Focus:
Focus: Wine
Wine export
export promotion
promotion through
through zz Focus:
Focus: Funding
Funding of
of research
research and
and development
development
international
international offices
offices in
in London
London and
and San
San Francisco
Francisco activities
activities
zz Funding:
Funding: Government;
Government; cluster
organizations zz Funding:
Government; statutory
statutory levy
levy
Wine
Wine Industry
Industry National
National
Wine
Wine Industry
Industry Information
Information Service
Service Education
Education and
and Training
Training Council
Council
zz Established
Established in
in 1998
1998 zz Established
Established in
in 1995
1995
zz Focus:
Focus: Information
Information collection,
collection, organization,
organization, and
and zz Focus:
Focus: Coordination,
Coordination, integration,
integration, and
and standard
standard
dissemination
dissemination maintenance
maintenance for
for vocational
vocational training
training and
and education
education
zz Funding:
Funding: Cluster
Cluster organizations
organizations zz Funding:
Government; other
other cluster
organizations
Source: Michael E. Porter and rjan Slvell, The Australian Wine Cluster Supplement, Harvard Business School Case Study, 2002
Public / Private Cooperation in Cluster Upgrading
Minnesotas Medical Device Cluster
Context
Context for
for
Firm
Firm
Strategy
Strategy
and
and Rivalry
Rivalry
Aggressive trade associations
(Medical Alley Association, High
Tech Council)
Effective global marketing of the
Factor cluster and of Minnesota as the
Factor Demand
(Input)
The Great State of Health Demand
(Input) Full-time Health Care Industry Conditions
Conditions Conditions
Conditions Specialist in the department of
Trade and Economic Development
Joint development of vocational- State sanctioned

technical college curricula with the reimbursement policies
medical device industry to enable easier adoption
Minnesota Project Outreach exposes and reimbursement for
businesses to resources available at innovative products
university and state government Related
Related and
and
agencies Supporting
Supporting
Active medical technology licensing Industries
through University of Minnesota Industries
State-formed Greater Minnesota Corp.
to finance applied research, invest in
new products, and assist in technology
transfer
Appropriate Roles of Government
in Cluster Development
A successful cluster policy builds on sound overall economic policies
and improvements in the general business environment
Government, in cooperation with the private sector, must identify all existing
and emerging clusters
To qualify as an emerging cluster there must be

Some viable companies present
A core of cluster-specific advantages in the diamond
Government policy should reinforce established and emerging clusters

rather than attempt to create entirely new ones
Government should support the development of all clusters, not choose

among them
Governments role in cluster initiatives is as facilitator and participant. The

most successful cluster initiatives are a public-private partnership
Cluster Policy versus Industrial Policy
Industrial
Industrial Cluster-based
Cluster-based
Policy
Policy Policy
Policy
Target desirable industries / All clusters can contribute to prosperity

sectors
Focus on domestic companies Domestic and foreign companies both
enhance productivity
Intervene in competition (e.g., Relax impediments and constraints to
protection, industry promotion, productivity
subsidies)
Emphasize cross-industry linkages /
complementarities
Centralizes decisions at the Encourage initiative at the state and
national level local level
Distort competition Enhance competition


development
Shifting Responsibilities for Economic Development
Old
Old Model
Model New
New Model
Model
Government
Government drives
drives economic
economic Economic
Economic development
development is is aa
development
development through
through policy
policy collaborative
collaborative process
process involving
involving
decisions
decisions and
and incentives
incentives government
government at at multiple
multiple levels,
levels,
companies,
companies, teaching
teaching and
and
research
research institutions,
institutions, and
and
institutions
institutions for
for collaboration
collaboration
Roles of Government in Economic Development
Improve the macroeconomic, political, legal, and social context

Establish a stable and predictable macroeconomic, legal, and political
environment
Improve the social conditions of citizens
Upgrade the general microeconomic business environment

Improve the availability, quality, and efficiency of cross-cutting or general
purpose inputs, infrastructure, and institutions
Set overall rules and incentives governing competition that encourage
productivity growth
Facilitate cluster formation and upgrading

Identify existing and emerging clusters
Convene and participate in the identification of cluster constraints and action
plans to address them
Lead a collaborative process of economic change

Create institutions and processes for upgrading competitiveness that
inform citizens and mobilize the private sector, government at all levels,
educational and other institutions, and civil society to take action
Role of the Private Sector in Economic Development
A companys competitive advantage is partly the result of the local
environment
Company membership in a cluster offers collective benefits
Private investment in public goods is justified
Take an active role in upgrading the local infrastructure

Nurture local suppliers and attract new supplier investments
Work closely with local educational and research institutions to
upgrade quality and create specialized programs addressing
cluster needs
Provide government with information and substantive input on
regulatory issues and constraints bearing on cluster development
Focus corporate philanthropy on enhancing the local business
environment
An important role for trade associations

Greater influence
Cost sharing 42
CAON South Africa 2003 06-09-03 CK.ppt Copyright 2003 Professor Michael E. Porter

development
Human Development Index 2002
Country HDI Rank Distance to Health Education Income
GDP Rank
Libya 64 -2 0.76 0.84 0.72
Mauritius 67 -18 0.77 0.77 0.77
Tunisia 97 -26 0.75 0.72 0.69
Algeria 106 -22 0.74 0.69 0.66
South Africa 107 -56 0.45 0.88 0.76
Egypt 115 -10 0.70 0.62 0.60
Namibia 122 -54 0.33 0.81 0.69
Morocco 123 -16 0.71 0.50 0.60
Swaziland 125 -33 0.32 0.77 0.64
Botswana 126 -62 0.25 0.75 0.71
Zimbabwe 128 -12 0.30 0.81 0.55
Ghana 129 1 0.53 0.62 0.50
Lesotho 132 -5 0.34 0.76 0.50
Kenya 134 19 0.43 0.72 0.39
Cameroon 135 0 0.42 0.65 0.47
Congo 136 27 0.44 0.75 0.35
Source: UNDP Human Development Report 2002

Causes of Economic Inequality
Inadequate education and skill development

Monopolies and restraints to competition
Discrimination
Faulty incentives for disadvantaged groups
Command and control regulation
Managerial ignorance
Integrating Economic and Social Policy
In the new thinking on competition, there is not an inherent conflict
between economic and social objectives, but a long term synergy
Economic Social
Objectives Objectives
The
Thecompetitiveness
competitivenessof ofcompanies
companiesdepends
dependsheavily
heavilyon
on
Rising
Risingskill
skilllevels
levels
Safe
Safeworking
workingconditions
conditions
AAsense
senseof ofequal
equalopportunity
opportunity
Low
Lowlevels
levelsofofpollution
pollution(pollution
(pollutionisisaasign
signof
ofunproductive
unproductiveuse
useofofphysical
physical
resources)
resources)
However,
However,efforts
effortstotomeet
meetsocial
socialobjectives
objectivesmust
mustbe
bealigned
alignedwith
with
productivity
productivityand andprepare
prepareand
andmotivate
motivateindividuals
individualsto
tosucceed
succeedin inthe
themarket
market
system
system
Efforts
Effortstotomeet
meeteconomic
economicobjectives
objectivesmust
mustinclude
includeexplicit
explicitprograms
programsto toraise
raise
human
humancapability,
capability,improve
improvethe
thelives
livesand
andsense
senseof ofopportunity
opportunityforfor
individuals,
individuals,andandenhance
enhancethethebroader
broaderbusiness
businessenvironment
environment
Integrating Economic and Social Policy
Examples
Training
Organize training investments around clusters
Housing
Create mechanisms to encourage home ownership; provide incentives for new company
formation in the construction cluster; reduce unnecessary costs of housing construction due
to regulatory and approval requirement; secure property rights to residents
Health Care
Create incentives for private health insurance; open health care delivery to competition
Social Security
Create incentives for saving; encourage a private pension system that agglomerates
investment capital
Environmental Quality
Institute a regulatory regime that encourages movement to more environmental friendly
methods; invest in technical assistance in eco-efficient processes and practices
Towards Sustainable Black Economic Empowerment
Selected Policies
Improve social conditions

Improve and extend public education
Invest aggressively in managerial training for black citizens
Create incentives and support the hiring and promotion of black
employees into low- and middle-management positions in white-
owned local companies as well as multinationals
Focus on upgrading indigenous local businesses, including in
agriculture, local services, and manufacturing businesses serving
local needs
Place early attention to clusters involving small- and medium size
enterprises
Create incentives for risk capital investments in business with
significant (>10%) black ownership. Avoid programs that apply only
to majority black-owned businesses, especially when other owners
are passive investors or private equity firms
There a no short cuts for addressing this long-term challenge


development
Influences on Competitiveness
Multiple Geographic Levels
World Economy
Broad Economic Areas
Groups of Neighboring
Nations
Nations
States, Provinces
Cities, Metropolitan
Areas
Regional Performance
Per Capita Income and Employment Growth by UK Region
18,000 UK average
London
16,000
East South East
R2 = 0.245
14,000
GDP Per UK average
Capita,
Scotland
1999 West
12,000
Midlands East Midlands
Yorkshire
South West
North West
10,000
Wales
North Northern
East Ireland
8,000
6,000
0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4%
Annual Growth in Employment, 1996-2000
Source: Office for National Statistics

Regional Performance
Poverty Levels by South African Provinces
Share of households
living in poverty,
1996
60%
50%
40%
30%
20%
10%
0%
Mpumalanga
KwaZulu
Gauteng
Northern
Province
Eastern
Northern
North West
Free State
Western
Cape
Natal
Cape
Cape
Source: The DTI, 2002
Specialization of Regional Economies
Select U.S. Geographic Areas
Denver,
Denver,CO CO Chicago
Chicago
Leather
Leatherand
andSporting
SportingGoods
Goods Communications
CommunicationsEquipment
Equipment
Oil and Gas Boston
Boston
Oil and Gas Processed
ProcessedFood
Food
Aerospace Analytical
AnalyticalInstruments
Instruments
Seattle-Bellevue-
Seattle-Bellevue- AerospaceVehicles
Vehiclesand
andDefense
Defense Heavy
HeavyMachinery
Machinery
Everett, Education
EducationandandKnowledge
KnowledgeCreation
Creation
Everett,WAWA Communications Equipment
Aerospace
AerospaceVehicles Pittsburgh, Communications Equipment
Vehicles Wichita,
Wichita,KSKS Pittsburgh,PAPA
and
andDefense
Defense Aerospace
AerospaceVehicles
Vehiclesand
and Construction
ConstructionMaterials
Materials
Fishing
Fishingand
andFishing
Fishing Defense
Defense Metal Manufacturing
Metal Manufacturing
Products
Products Heavy
HeavyMachinery
Machinery Education
EducationandandKnowledge
Knowledge
Analytical
AnalyticalInstruments
Instruments Oil
Oil andGas
and Gas Creation
Creation
San
San Francisco-
Francisco-
Oakland-San
Oakland-San Jose
Jose
Bay
Bay Area
Area
Communications
Communications
Equipment
Equipment
Agricultural
Agricultural Raleigh-Durham,
Raleigh-Durham,NC NC
Products
Products Communications
CommunicationsEquipment
Equipment
Information
Information Information
InformationTechnology
Technology
Technology
Technology Education
Educationand
and
Knowledge
KnowledgeCreation
Creation
Los
Los Angeles
Angeles Area
Area
Apparel
Apparel Atlanta,
San Atlanta,GA
GA
Building
Building Fixtures,
Fixtures, SanDiego
Diego Construction
Leather ConstructionMaterials
Materials
Equipment
Equipment and
and Leatherand
andSporting
SportingGoods
Goods Transportation
Power Transportationand
andLogistics
Logistics
Services
Services PowerGeneration
Generation Houston
Houston Business Services
Education Business Services
Entertainment
Entertainment Educationand
andKnowledge
Knowledge Heavy
HeavyConstruction
ConstructionServices
Services
Creation
Creation Oil
Oil andGas
and Gas
Aerospace
AerospaceVehicles
Vehiclesand
andDefense
Defense
Note: Clusters listed are the three highest ranking clusters in terms of share of national employment
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
Principles of Provincial Economic Development
Delegate authority and accountability for economic policy to the

provincial level
Improve the provincial business environment rather than

attempting to distort location decisions with subsidies or mandates
Identify and enhance existing and emerging local clusters.

Clusters may trade either internationally or primarily with other
provinces
Efforts to attract investment should capitalize on the uniqueness of

the provinces and build on clusters rather than across-the-board
promotional schemes
Export Processing Zones and Competitiveness
Export processing zones are more successful if they are targeted

around the needs of specific clusters
Use a cluster-based approach to FDI promotion
Involve companies already present in the zone to attract further
specialized suppliers and service providers
Export processing zones can improve a countrys or provinces

competitiveness if they trigger broader changes in the business
environment
Creation of specialized input factors, such as specialized
suppliers and research facilities
Upgrading of rules and regulations, for example in the labor
market
Improvement of government services, for example in customs
services
Source: Michael Porter, Niels Ketelhohn (2003)


development
South Africas Export Destinations
1997-2001
100%
75%
Oceania
North America
Latin America
50% Europe
Asia
Africa (other)
Neighbours
25%
0%
1997 1998 1999 2000 2001
Note: Excludes exports to unspecified destinations (2001: 28%)

The Importance of Regional Trade for Developing Economies
Trade
TradeSolely
Solelywith
with Trade
Tradewith
with
Advanced
AdvancedNations
Nations Developing
DevelopingNations/Neighbors
Nations/Neighbors
Exports
Exportsbased
basedon oninherited
inheritedcomparative
comparative Exports
Exportscan
canbebebased
basedon oncreated
created
advantages
advantages competitive advantages
competitive advantages
Natural
Naturalresources
resources Industries
Industrieswhere
whereaacountry
countryhas
has
Cheap achieved
achieved greater productivitythan
greater productivity
Cheaplabor
labor than
Can neighbors
neighbors
Canlead
leadtotonarrow
narrowexport
exportbase
baseand
andlimited
limited
local company presence in the value chain Differentiated
Differentiatedproducts
productsthat
thatmeet
meet
local company presence in the value chain
Inbound regional needs
regional needs
InboundFDI
FDIcancanfocus
focusheavily
heavilyonon
accessing More
Moreefficient
efficientproduction
productionprocesses
accessingresources
resourcesversus
versusmore
more processes
productive given factor costs
productiveactivities
activities given factor costs
Vulnerable Broadening
Broadeningexport
exportbase
Vulnerabletotoexchange
exchangeraterateswings
swingsand
and base
macroeconomic shocks
macroeconomic shocks Widening
Wideningskills
skillsininthe
thevalue
valuechain
chain
Outbound
Outboundnotnotjust
justinbound
inboundFDI
FDI
Can create a dead-end strategy leading Boosts productivity across many parts of
to domestic pressure for intervention the national economy
Policies must focus on upgrading local Stimulates the improvement of skills by local
capabilities and improving a nations firms and provides a stepping stone for
value proposition for more advanced wider internationalization
activities
Cross-National Regions and Economic Strategy
Traditional Views
Regions as free trade zones; regions as economic unions (e.g., United States,
European Union)
New View
A regional strategy as a powerful tool to enhance competitiveness in autonomous
countries
Internal trade and investment
Gains from internal trade and investment
AND
Company operations and strategy
Enhancing the competitive capability of firms
Expanding trade in non-traditional export industries
Business environment
Mutual benefits to the productivity of the business environment through policy coordination that
captures external economies and the benefits of specialization in institutions and infrastructure across
borders
Cluster development
Cross-border cluster specialization and integration
Foreign investment
Enhancing interest and investment in the region by the international community
Economic policy process
Improving economic policy formulation and implementation at the national level
Cross-National Economic Coordination
Alternate Geographic Levels
World Economy
Broad Economic Areas e.g. Sub-Saharan Africa
Groups of Neighboring
e.g. Southern African
Nations
nations
Nations e.g. South Africa
States, Provinces e.g. Northern Cape
Cities, Metropolitan
Areas
Cross-National Economic Coordination
Illustrative Policy Areas
Factor
Factor Context
Contextfor
for Related
Relatedand
and
Demand
Demand Regional
Regional
(Input)
(Input) Strategy
Strategy Supporting
Supporting
Conditions
Conditions Governance
Governance
Conditions
Conditions and
andRivalry
Rivalry Industries
Industries
Improve regional Coordinate Agree on foreign Set minimum Establish ongoing Share best
transportation macroecono- investment environmental upgrading process practices in
infrastructure mic policies promotion standards in clusters that government
guidelines to limit cross national operations
Create an efficient Eliminate Set minimum
forms of borders, e.g.
energy network trade and safety Improve regional
investment
investment standards Tourism institutions
Upgrade/link regional promotion that do
barriers within Regional
communications not enhance Establish Agribusiness development
the region
productivity reciprocal bank
Upgrade/link Textiles and
Simplify consumer Dispute
financial markets Coordinated Apparel
cross-border protection laws resolution
competition
Upgrade higher regulations Information mechanisms
policy
education through and paperwork Technology Policy
facilitating coordination
Guarantee
specialization and body
minimum basic
student exchanges
investor Develop a
Expand cross-border protections regional
business and financial marketing
information access strategy
and sharing
Coordinate activities to
ensure personal
safety
Central American Logistical Corridor
Roads
Ports
Airports
Logistic Corridor

development
Selected References
The Competitive Advantage of Nations, New York: The Free Press, 1990
Clusters and the New Competitive Agenda for Companies and Governments in On Competition,
Boston: Harvard Business School Press, 1998
The Microeconomic Foundations of Economic Development, in The Global Competitiveness Report

1998-99, (World Economic Forum, 1998)
The Current Competitiveness Index: Measuring the Microeconomic Foundations of Prosperity in The
Global Competitiveness Report 2000-01, New York: Oxford University Press, 2000
Enhancing the Microeconomic Foundations of Prosperity: The Current Competitiveness Index in The
Global Competitiveness Report 2001-02, New York: Oxford University Press, 2001
Building the Microeconomic Foundations of Prosperity: Findings from the Microeconomic

Competitiveness Index in The Global Competitiveness Report 2002-03, New York: Oxford University
Press, forthcoming 2002
Location, Competition, and Economic Development: Local Clusters in a Global Economy, (Economic
Development Quarterly, February 2000, 15-34)
Locations, Clusters, and Company Strategy in The Oxford Handbook of Economic Geography, (G. L.
Clark, M.P. Feldman, and M.S. Gertler, eds.), New York: Oxford University Press, 2000
Attitudes, Values, Beliefs and the Microeconomics of Prosperity, in Culture Matters: How Values
Shape Human Progress, (L.E. Harrison, S.P. Huntington, eds.), New York: Basic Books, 2000
Web resources
Institute for Strategy and Competitiveness www.isc.hbs.edu
ISC Cluster Mapping Data (US) data.isc.hbs.edu/isc/index.jsp
Cluster of Innovation Initiative

Council on Competitiveness www.compete.org
Monitor Company www.monitor.com
Selected Middle Income Economies over Time
Growth Rate of Real

GDP (PPP) per Capita
8%
6%
4%
2%
0%
1990-95
-2% 1995-2002
-4% 1990-2002
-6%
-8%
-10%
-12%
ry
ut uay
C a
Ar xico
us
R a
ta o
U na
a
sia
To a
Bo land
M ile
Sl ica
Es i a
M il
Li tia
H ia
az
C bag
r ic
ni
n
si
ga
ak
n
h
i
an w a
a
rit
ay
ua
us
R
nt
So rug
to
Br
Af
C
ro
un
e
o
ov
au
ge
al
ts
th
P
h
os
M
d
ad
id
Countries sorted by 1990 2002 CAGR of Real GDP per Capita (PPP)
in
Tr
Source: EIU 2003

Comparative Labor Productivity Performance
Labor Productivity
Selected Sub-Saharan African Economies
(Real GDP per Employee),
2002
$14,000
$12,000 Mauritius
South Africa
$10,000 Gabon
$8,000
$6,000
Namibia
$4,000
Zimbabwe Cote dIvoire Cameroon

$2,000 Senegal
Zambia Nigeria Ghana Angola
Kenya Uganda
Tanzania
$0
-4% -3% -2% -1% 0% 1% 2% 3% 4% 5%
Change of Labor Productivity, CAGR, 1995-2002
South Africas labor productivity is high relative to other African economies, but
its growth has been only average over recent years
Source: EIU 2003
Top 10 Listed South African Companies
By Market Capitalization
Company Sector Market Capitalization

(US$m, 12/2002)
Anglo American Mining Finance 21,751
BHP Billiton Mining 12,996
C. Financiere Richemont Appliances 9,736
Sasol Oil & Gas 8,101
Anglo American Platinum Mining 7,860
SAB Miller Breweries 6,994
Gold Fields Mining 6,523
Old Mutual Insurance 5,273
Standard Bank Group Banking 4,631
Firstrand Banking 4,610
Source: UNDP, 2003

Top 30 South Africas Export Industries by Export Value, 2000
No . Ind us try Clus ter Sub -clus ter
1 Diamo nd s uns et,ro ug h,uns o rt Pers o nal Precio us ,Semi-P Sto nes
2 Sp ecial Trans actio ns M ultip le Bus ines s M is c M ulti Bus ines s Gd s
3 Oth Co al, no t ag g lo merated M aterials /M etals Co al,Lig nite,Peat,Briq uets ,Co ke
4 Pas s M o to r Veh exc b us s es Trans p o rtatio n Pas s eng er M o to r Vehicles
5 Gas ,Liq uid Filters etc M ultip le Bus ines s Lab o rato ry Eq uip ment
6 Aluminium,Allo ys ,o nwrg ht M aterials /M etals Aluminum, Pro ces s ed
7 Other Ferro -Allo ys M aterials /M etals Pig Iro n,Stl Po wd ers ,Sho t,Allo y
8 Dmnd s nnind ,uns et,cut no t s et Pers o nal Precio us ,Semi-P Sto nes
9 Iro n Ore Ag g lo merates M aterials /M etals Co ncentrated M tl Ores
10 Other M o to r Vehcl Parts Trans p o rtatio n Vehicle Bo d y Parts
11 Gas Oils Petro leum/Chemicals Petro leum Pro d ucts
12 M o lyb d , nio b ium etc o res M aterials /M etals Bas e M etal Co ncentrts ,Ores
13 Pts nes o f Chairs etc Ho us ing /Ho us eho ld Co mmercial Furniture
14 Raw Beet and Cane Sug ar Fo o d /Beverag es Sug ar
15 Wine o f Fres h Grap es Fo o d /Beverag es Wine
16 Chem Wo o d Pulp Dis s o lving Fo res t Pro d ucts Wo o d Pulp
17 Prec M etal Scrap , was te M aterials /M etals Precio us M etal Co ncentrts ,Ores
18 Iro n,Simp le Steel co ils M aterials /M etals Steel Co il,Ro d ,Bars
19 Stnles s Steel etc co ils M aterials /M etals Steel Co il,Ro d ,Bars
20 Ferro -M ang anes e M aterials /M etals Pig Iro n,Stl Po wd ers ,Sho t,Allo y
21 Other Pap er etc, b ulk nes Fo res t Pro d ucts Other Pap er
22 Lo rries ,Trucks Trans p o rtatio n Trucks , Ro ad Vehicles
23 Pulp wo o d Chip s . p articles Fo res t Pro d ucts Wo o d Fib er
24 M o to r,Aviatio n Sp irit Petro leum/Chemicals Petro leum Pro d ucts
25 Grap es fres h Fo o d /Beverag es Other Fruits
26 Orang es ,fres h o r d ried Fo o d /Beverag es Citrus Fruits , Fres h o r Dried
27 Titanium Oxid es M aterials /M etals Ino rg anic Chemicals ,Oxid es
28 Alumnm Plate, s heet s trip M aterials /M etals Aluminum, Pro ces s ed
29 Oth Irn,Stl Plt,Sht-Irn o r Smp M aterials /M etals Plate Sheet, Flat Ro lled
30 Oth Acyclic Hyd ro carb o ns Petro leum/Chemicals Other Hyd ro carb o ns

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The Competitive Advantage

Professor Michael E. Porter

Johannesburg, South Africa

Competitive advantage Competitive advantage (or

Competitiveness is determined by the productivity with which a nation uses its

Nations compete in offering the most productive environment for business

Innovation is more than just scientific discovery

Economic growth has been sluggish since the late 1990s;

Government is increasingly recognizing the need for

Internationally, trade agreements with African neighbors, the

Growth Rate of Real

Source: EIU 2003

GDP per Capita,

CAGR of GDP per Capita Relative to the

Source: World Development Indicators 2002

A new approach to economic development will be necessary

A sound macroeconomic, political, legal, and social context creates the

Stability and confidence support

Successful economic development is a process of successive economic upgrading, in which

Oil Oil Oil

Oilfield Services/Engineering & Contracting Firms

Clusters increase productivity and efficiency

Clusters stimulate and enable innovation

Clusters facilitate commercialization

Clusters reflect the fundamental influence of externalities / linkages

There is often an array of clusters in a given field in different locations,

Global innovation centers, such as Silicon Valley in semiconductors, are

Other clusters focus on manufacturing, outsourced service functions, or

Firms based in the most advanced clusters often seed or enhance

The challenge for an economy is to move from isolated firms to an array

United States Vietnam/Indonesia

Source: Research by HBS student teams in 2002

Low Cost Efficiency Through Unique

Source: Porter, Michael E., The Competitive Advantage of Nations,

Upgrade the business environment

Foster cluster development

Shift the roles of government and business in economic

Integrate social and economic policies

Create economic strategies at the provincial level

Lead a cross-national economic strategy for Southern Africa

Competitive Advantages Competitive Disadvantages

Financial Market Sophistication 13 Quality of Math and Science Education 71

Source: US Patent and Trademark Office (www.uspto.gov). Authors analysis.

Organization Patents Issued from 1996 to 2001

Competitive Advantages Competitive Disadvantages

Extent of Distortive Government Subsidies 9 Cooperation in Labor-Employer Relations 70

Competitive Advantages Competitive Disadvantages

Consumer Adoption of Latest Products 48

Competitive Advantages Competitive Disadvantages

Country Ranking, Arrows Country Ranking, Arrows

Local Availability of Components 13 Local Availability of Specialized 44

South Africa needed to produce many supplies domestically to overcome trade

Competitive Advantages Competitive Disadvantages

Prevalence of Foreign Technology 6 Nature of Competitive Advantage 68

Upgrade the business environment

Foster cluster development

Shift the roles of government and business in economic

Integrate social and economic policies

Create economic strategies at the provincial level

Lead a cross-national economic strategy for Southern Africa

Materials/Metals Personal (Diamonds)

South Africas exports continue to be dominated by natural resource-intensive products

Australian Wine Australian Wine