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International Competitiveness, Productivity & Quality

Dr Subhash Gupta

Prior Knowledge DiscussionForum


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Why do countries compete to try to get international businesses to locate in their countries? What kinds of economic & social factors would attract international business to a country? How can an unprofitable international business improve its chances of becoming profitable?
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Definition of Competitiveness

With the globalization phenomenon, the increased mobility of corporate assets, and the requirement to recruit productive human resources, this question is becoming very difficult to answer. When economic and financial data of a particular country is used to compare with another countrys, the analyst must be very careful with its consistency.
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Definition of Competitiveness
Various countries employ different terminology to compare its competitiveness with the rest of the world. There is no one finite set of data, which provides for the full meaning of competitiveness. Competitiveness would involve a series of factors to be considered: (a)Size -effect (b)Population at a particular point in time (c)Factors of Productions (e.g. land, labour, capital, & time) (d)Use of New Technology (e)Macro-economic policies (e.g. financial performance) (f)External Factors
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The OECD defines competitiveness as "The degree to which a country can, under free and fair market conditions, produce goods and services which meet the test of international markets, while simultaneously maintaining and expanding the real incomes of its people over the long-term".
The World Competitiveness Report suggests eight major factors which influence the competitiveness of companies and nations

1. Internationalization 2. Domestic Economy 3. The State (Government) 4. Finance 5. Infrastructure 6. Management 7. Science & Technology 8. Quality of Labour Force
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Structure of Competitiveness

Resources

Human Resources Finance R & D Technology

Commercial Exploit Science & Technology Exchange of Know-How

Economic Innovation
Degree of Competition Economic Stability Business Perceptions Workers Attitude

Business Environment

Increase in Productivity Increase in GDP New Employment

Economic Results

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International Competitiveness
Competitiveness is underpinned by 4 key factors, namely: 1. People/skills (Human capital) these include technical skills, entrepreneurship and managerial skills which call for education and training to work hand in glove with business. 2. Technology/Knowledge Turning R&D (scientific advances) into profitable business through research and innovation, i.e. advances in microchips and biotechnology
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International Competitiveness
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Infrastructure and superstructures infrastructure modernisation and integration of physical infrastructure such as roads, railways, ICT, and energy/water; governance, legal and regulatory framework and working culture. Institutions of trade facilitation Institutions such as standards and quality agencies, trade promotion etc.
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The Competitiveness Pyramid

High standard of living

Trade
Productivity (Quality should exist)
Investment in productive facilities (Factories, R&D, Technology

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Establishing a Global Presence


Competitive Advantage:
      

when a country outperforms their competitors around the world by:

Improved or superior products Better pricing Higher quality Better service Uniqueness Access to markets & distribution channels Profit

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Establishing a Global Presence


Competitive Advantage Measurements: Market share & performance (vs. competitors) Partnerships with suppliers Customer demand Customer loyalty Distribution Service Basic resources (support systems & skilled & knowledgeable workers)
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Establishing a Global Presence




Gross Domestic Product (GDP)




Is the total value of all g/s produced in a country during a specific period. Is the total GDP divided by the number of people in the country. Allows countries to compare productivity rates The higher the GDP per capita, the higher the countrys productivity rate
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GDP per capita


  

Achieving Competitive Advantage


Opportunity Cost, & Absolute & Comparative Advantage


Opportunity Cost: cost of an opportunity that is sacrificed to pursue another opportunity

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Achieving Competitive Advantage


Absolute Advantage:


When a country produces a good at a lower cost or higher productivity relative to another country Enables a country to set prices & policies without fear of competition Uses fewer resource to produce a product than another country


Canada production of wheat and Brazil production of coffee.

Countries should specialize in the production of goods that they have an absolute advantage & then trade for goods produced by other countries


French trade wine for English textiles.

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Achieving Competitive Advantage


Comparative Advantage  Country produces a good at a lower opportunity cost (relative cheaper production) than another country  Created when a country becomes more efficient, has better technology has easier access to resources

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The Meaning of Productivity


Productivity: the amount of work that is accomplished in a unit of time using the factors of production. Business Purpose & Goals  Business goal = destination = make a profit  Purpose: intention to act - usually to fulfill a need or to solve a problem  Companies need to be productive to reach their goals

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The Meaning of Productivity


Factors Influencing a Country's Productivity  Use of economic resources  Cost of labour  Accessibility & quantity of natural resources  Level of technology  Education level  Work ethic  Quality of government services  R&D  Size of markets (domestic & international)  Organization structure & efficiency

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The Meaning of Productivity


Productivity performance is one of the best indicators of economic performance:  A countrys standard of living & quality of life are determined by its productivity as higher wages/salaries and increased profits may be enjoyed.

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Country's Global Challenge




The Knowledge Economy




Increased reliance of business, labour & government on knowledge, information & ideas The sum of knowledge, information, intellectual property, talent & experience within a country Knowledge prime source of competitive advantage in the global economy Transparency (sharing) of information equals productivity Tech & scientific breakthroughs & new processes

Intellectual Capital


Thriving in the Knowledge Economy Global


 

Innovation & Quality




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Country's Global Challenge


 

Taxation & Innovation




Money collected by governments Process used by a company to change organizational structure, a product line or production process to become more efficient, productive & competitive High standard of living & produce sophisticated range of products Developing nations (newly industrialized economies i.e. NIE) moving toward more sophisticated manufacturing Less-developed nations largely agricultural-based with political instability

Rationalization


Developed nations & Economies


  

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Country's Global Challenge




Economies of Scale:


where the cost of item goes down when items are bought or produce din large quantities The demand for the industrys product in Canada The trade balance between Canada & other countries Organizational change Canadian business activities

Causes & Effect of Rationalization


   

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Country's Global Challenge


6 imperatives of success in a Globalized world
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Effective social organization




The ability of a country to marshal its resources in a disciplined way

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Speed of Adaptation


The facility or ease with which countries, governments, businesses & workers must respond to change

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The need to be open to ideas & competition from beyond borders




The need to be open with national borders

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A country cannot afford to live with walls or barriers domestically




An entrepreneurial culture as well as the ability to manage well

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The need to be empowered with knowledge & skills




a never-ending process of renewal

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Quality Control & continual Improvement


Kaizen (ki-zan):  Japanese name for the concept of continual improvement
  

Believe that to gain competitive advantage, there must be a commitment to quality. promotes everyone working together to make improvements Helps eliminate waste in all systems & processes of an organization

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Quality Control & continual Improvement




Quality Control
 

W. Edwards Deming = quality expert Developed the 14 Points for Management


    

Always continuously improve the product or service to stay competitive & create jobs Encourage education of the workforce both on & off the job Allow workers to take responsibility for & provide in their work Remove communication barriers between management & the factory floor Encourage teamwork between departments to improve product quality and to create common goals. Japan adopted principles & transformed

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Quality Control & continual Improvement




Total Quality Management (TQM)




A method of managing organizations with a commitment to continuously improve the products, processes & work habits of employees Market-driven organizations respond to market needs by providing customers with high=quality g/s that are low In cost and available when required.

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Strategies To Remain Competitive in the Future


Maintain stable macro-economic policy Maintain stable prices for the commodities and services Seek for ways and means to become more innovative Keep an openness to trade and foreign capital Ensure that the human resources of the country are well equipped Promote new ideas concept Invite for strategic alliances, when deem necessary Invest in more Research & Development Costs Encourage the use of new technology Ensure that the Labour Market is well protected Dr Subhash Gupta
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