COMPETITIVE ADVANTAGE OF

NATIONS

WHAT IS COMPETITIVENESS?
Competitiveness depends on the productivity with which a nation uses its human, capital, and natural resources. Productivity sets the sustainable standard of living (wages, returns on capital, returns on natural resources) that a country can sustain It is not what industries a nation competes in that matters for prosperity, but how productively it competes in those industries Productivity in a national economy arises from a combination of domestic and foreign firms The productivity of local or domestic industries is fundamental to competitiveness, not just that of export industries

Nations compete to offer the most productive environment for business The public and private sectors play different but interrelated roles in creating a productive economy

Competitive advantage is defined as the strategic advantage one business entity has over its rival entities within its competitive industry. Achieving competitive advantage strengthens and positions a business better within the business environment.

Competitive advantage is essentially a position of superiority on the part of the firm in relation to its competition in any of the multitude of functions/activities performed by the firm.

There are two questions; 1. Do I perform some function in a superior /distinctive way, compared to competition? 2. Does the superiority/distinction mean something in terms of customer value?

Competitive advantage is thus superior or distinctive competence of the firm relative to competition in some area.

Based on four forces Known as Porters Diamond

FACTOR CONDITIONS
include those factors that can be exploited by companies in a given nation. Factor conditions can be seen as advantageous factors found within a country that are subsequently build upon by companies to more advanced factors of competition. Factors not normally seen as advantageous, such as workforce shortage, can also be seen as a factor potentially strengthening competitiveness, because this factor may heighten companies' focus on automation and zero defects. Some examples of factor conditions: -Highly skilled workforce -Linguistic abilities of workforce -Rich amount of raw materials -Workforce shortage

DEMAND CONDITIONS
Home market the information that shapes the opportunities that companies perceive and the directions in which they deploy their resources and skills. Home demand gives companies clear and early picture of emerging buyer needs The character of home demand is more significant than the size. -Market segment is larger or more visible than in foreign countries. -Buyers are more sophisticated. -Buyers needs anticipate or even shape those of other nations

RELATED AND SUPPORTING INDUSTRIES

The international competitiveness of supplier industries & other related industries Those who are internationally competitive can provide competitive production methods and trigger innovation and upgrading.

FIRM STRATEGY STRUCTURE AND RIVALRY

The conditions governing how companies are created, organized, and managed, and the nature of domestic rivalry The way in which companies are created, set goals and are managed is important for success. The presence of intense rivalry in the home base is also important; it creates pressure to innovate in order to upgrade competitiveness.

business leaders may analyze which competitive factors may reside in their company's home country, and which of these factors may be exploited to gain global competitive advantages. Business leaders can also use the Porter's diamond model during a phase of internationalization, in which leaders may use the model to analyze whether or not the home market factors support the process of internationalization, and whether or not the conditions found in the home country are able to create competitive advantages on a global scale. Finally, business leaders may use this model to asses in which counties to invest, and to assess which countries are most likely to be able to sustain growth and development.

IMPROVE THE NATIONAL DIAMOND

Form clusters work with its home-nation buyers, suppliers, and channels Take explicit steps to create specialized factors

GLOBAL COMPETITIVENESS RANKING

GCI The global competitive index measures how productively a country uses available resources. GCI assesses the ability of countries to provide high levels of prosperity to their citizens. This in turn depends on how productively a country uses available resources. Therefore, the Global Competitiveness Index measures the set of institutions, policies, and factors that set the sustainable current and medium-term levels of economic prosperity."[4][5]

IMPLICATIONS ON INDIA

GCI top ten : Switzerland 5.74 () Singapore 5.63 (+1) Sweden 5.61 (1) Finland 5.47 (+3) United States 5.43 (1) Germany 5.41 (1) Netherlands 5.41 (+1) Denmark 5.40 (+1) Japan 5.40 (3) United Kingdom 5.39 (+2)

2009, India ranked 49 thamongst 142 global economies in competitiveness, 2010 - 51 2011 even bigger fall of 5 places to 56th most competitive economy in the world.
China, on the other hand has been consistently making progress over past decade and has been rising on competitiveness index and is currently ranked 26th in the world. If you compare China with India, the gap between them is widening the score difference between the two economies has increased six fold between in last 5 years alone!

India is ranked 3rd in the world for its market size, but 105th out of 142 countries when it comes to Macroeconomic Conditions.

Lowest Competiveness Areas for India [out of 142 countries] - Ranks 123rd for Business costs of Terrorism - Ranks 112th for Quality of Electric Supply - Ranks one of worst (139th) for Inflation, annual % change - Ranks 114th for Infant Mortality - Ranks 108th for Secondary Education Enrollment - Ranks 124th for Total tax rate, % profits - Ranks 128th for Trade tariffs and percentage duty

Highest Competiveness Areas for India [out of 142 countries] - Ranks 3rd for Domestic market size - Ranks 4th for Foreign market size - Ranks 12th for Available airline seat kms/week - Ranks 15th for Gross national savings, percentage GDP - Ranks 15th for Financing through local equity market - Ranks 14th for Local supplier quantity in Business Sophistication - Ranks 20th for Legal rights - Ranks 21st for Availability of scientists and engineer