Network for Quality, Productivity & Competitiveness - Nepal

1. Network for Quality, Productivity & Competitiveness - Nepal Presentation on Competitiveness February 13, 2005 By Saroj Rai Solar Energy Component Coordinator Energy Sector Assistance Programme (ESAP) Alternative Energy Promotion Centre (AEPC) Dhobighat, Lalitpur, Nepal Tel: +977-1-55 39 390/55 39 391 Fax: +977-1-55 39 392 E-mail: sarai@aepc.gov.np Website: www.aepcnepal.org

2. Presentation Overview • Concept of Competitiveness • Personal Competitiveness • Defining Competitiveness in Business • Competitive Analysis: Michael E Porter’s 5-Force Model • Competitive Advantages • Remaining Topics on Competitiveness

3. Concept of Competitiveness • Competitiveness is the ultimate virtue • of being able to compete, contest, or strive • to survive, better perform or outperform, etc. • in long run it is survival of the fittest – Darwinism • Competitiveness at Different Levels • Person -> Family -> Community -> Nation • Person -> Organisation -> (Industry) Cluster -> Nation -> Region -> Globe

4. Concept of Competitiveness (continued) • Factors of Competitiveness • Physical, mental/educational, psychological, spiritual/religious, • Cultural, socio-economic, political • Competitiveness at higher levels also depend on that of the lower levels e.g. family competitiveness depends that of individual members and so on. • Some Bases of Competitiveness • Resources & Sizes • Quality, Productivity, Innovation, Improvements • Bargaining Power over Suppliers, Buyers, etc. • Strategy, Focus, Specialisation, etc.

5. Concept of Competitiveness (continued) • Driving Forces of Competitiveness • Sense of urgency for survival • Vision, leadership • Competitive environment • Customers’ sophistication • Quality/competitiveness of support services • Policy and structural frameworks, etc.

6. Personal Competitiveness • Foundation of all levels’ competitiveness • Competing with others is not enough – compete with yourself! • Strategic career advancement and competitiveness • Some not-so-conventional personal management and development frameworks or tools • Seven Habits of Highly Successful People – Stephen R. Covey • Lord Buddha’s Astangik Marga • You Can Win – Shiv Khera • Art of living, yoga, meditation, exercise, etc.

7. Defining Competitiveness in Business • Conventional definition – too narrow • race among the players in the industry or sector to improve your bottom line • Whoever hurts your business. • Broader definition • Whoever and whatever hurt your business! • Because, Profit = Volume X Unit Price – (Fixed Cost + Volume X Unit Cost)

8. Five-Force Model of Competitive Analysis and Business Profitability • Prof. Michael E Porter of Harvard B School redefined competitiveness in business in his 5-Force Model for Competitive Analysis in his book (Competitive Strategy, 1980) • He argues that besides rivalry among the industry players, there 4 competitive forces which determine profitability.

9. Five-Force Modelof Competitive Analysis

10. Competitive Analysis: Threat of New Entrants • Entry Barriers to Address the Threats • Economies of scale • Product differentiation • Capital requirements • Switching costs • Government policy and regulation • Expected retaliation • Entry-deterring price

11. Competitive Analysis:Bargaining Power of Suppliers • Suppliers (of materials, equipment, labour, capital, etc.) are powerful if: • The supplier group is dominated by a few companies and is more concentrated than the industry itself • Suppliers face no threat from substitutes • The industry is not an important customer of the supplier group • The suppliers’ product is an important input to the industry’s business • Suppliers’ products are differentiated or have built up switching costs • Suppliers pose a credible threat of forward integration.

12. Competitive Analysis:Bargaining Power of Buyers • Buyers are powerful when: • They are more concentrated than the seller • They purchase in large volumes • They have low switching costs • They possess much info about the seller and the product • They have ability to integrate backward • There are good substitute products • The product is standard or undifferentiated • The product makes little impact on quality of buyers’ products.

13. Competitive Analysis: Threat of Substitute Products • Substitute products pose a threat when • There is an attractive price-performance alternative • They could improve performance • They are produced by industries earning high profits • They require none or few switching costs • Buyers have a high propensity to substitute

14. Competitive Analysis: Rivalry Among Existing Firms • Rivalry is stronger when: • There are many equally able competitors • There is slow industry growth • There are high fixed or storage costs • There are no product differentiation or no little switching costs • Capacity is built up in large increments • There are competitors of diverse interests, origins, background, etc. • High strategic interests are involved • Exit barriers are high.

15. Competitive Advantage vis-à-vis Other Players • Prof. Michael E Porter adds in his 2nd book (Competitive Advantage, 1985) that competitive advantage of a firm as the other determinant of profitability. • Competitive advantages (against others in the industry) result in above-average profitability • Small-but-hard-to-emulate competitive advantages are sustainable (kaizen is useful to be a “moving target”) • Value chain analysis is very useful to look for sustainable and spread out competitive advantages.

16. Remaining Topics on Competitiveness • Competitiveness of an industry/sector • The Diamond Model • Competitiveness Advantage of a Nation • Prof. Michael E Porter wrote his 3rd book called Competitive Advantage of Nations published in 1990. • Competitiveness of a Cluster • Transforming Porter’s competitive framework to economic development (thro’ private sector) (Michael E Porter’s 4th Book) Thank you.