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Competitiveness

Competitiveness. Competitive Advantage of Nations Michael Porter. Key to high productivity is the development of leading industries able to compete and dominate sectors at the international level. 4 self-reinforcing necessities for competitive industries referred to as the diamond model.

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Competitiveness

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  1. Competitiveness

  2. Competitive Advantage of NationsMichael Porter • Key to high productivity is the development of leading industries able to compete and dominate sectors at the international level. • 4 self-reinforcing necessities for competitive industries referred to as the diamond model. • National conditions tend to create multiple competitive industries.

  3. Four points • Factor Conditions: Resources, capital, skilled labor • Demand Conditions: A base of demanding customers eager to buy quality products. • Firm Strategy, Structure, & Rivalry: Match between industry operations and product. • Related & Supporting Industries: Producing key intermediate inputs and supplies.

  4. Link

  5. Three (Two Domestic) Intensely Competitive Console Makers • Varied Industry of Software Makers Ex. Japanese Console Games Firm Strategy, Structure, & Rivalry Factor Conditions Demand Conditions Related & Supporting Firms • Most intense customer base • Unique taste set • Technically adept work force • Creative animation trad. • Broadband Network • Strong Home Electronics Ind.

  6. Clusters and Competitiveness • Cluster: Concentrated industries w/ similar companies working in single location - e.g. Silicon Valley, Hollywood etc. Stimulates • Productivity • Innovation and Business Formation Link

  7. Competitions vs. Scale • Advanced production involves complex and multi-stage processing. This requires a high degree of coordination and potentially large scale. • Knowledge creation requires fixed costs which might be spread over broader base. • Competition is necessary to spur performance and provide good performance.

  8. Value of Clusters: Productivity • Better access to Employees and Suppliers • Access to Specialized Information • Personal Relationship and Trust • Complementarities • Coordination of Standards • One-stop shopping for customers • Spirit of Competitiveness.

  9. Value of Clusters:Innovation & Business Formation • Low barriers to entry • Transfers of Information • Ease of Experimentation

  10. Minnesota Medical Apparatus Cluster US Patent Office Open heart surgery pioneers at University of Minnesota and Mayo Clinic

  11. Measuring Competitive Industries For industry j, • Share of World Exports • % Growth in Exports - % Growth in World Exports • US$ Value of Trade

  12. Mapping Competitive Industries World Trade Organization Statistics Database

  13. Competitive Industries Singapore Net Exports relative to World Exports Competitive Industry: Petrochemicals International Merchandise Trade

  14. Singapore Petrochemical Industry • Factor Conditions: Capital intensive, skilled labor requirements • Demand Conditions: Chemicals important for advanced Asian manufacturing industries, broad regional demand • Related & Supporting Industries: Petroleum by-products key intermediate inputs and supplies.

  15. Jurong Island: Singapore’s Refining and Petroleum Hub Link

  16. Firm Strategy, Structure, & Rivalry: Dominated by large international firms. Fits w/ Singapore’s int’l orientation & necessary scale economies

  17. Biomedical Cluster Link • Singapore EDB decided in 2000 to diversify the economy by building a biomedical cluster • Competitive advantages • Chemical industry, Strong IP protection, domestic demand for high quality health care, openness to foreign companies and talents. • Support • Infrastructure: Biopolis industrial park. • Education: Promote creativity in general education, specific training in biomedical research. • Subsidies for R&D

  18. Cluster Policy vs. Industrial Policy • No “desirable” industries, clusters can generate productivity in any industries. • Key is not “high-tech”, but innovation and creation of new products. • Avoid target subsidies, but reduce impediments to competition. • International firms contribute to clusters, not just domestic champions. • New clusters build on old clusters through a process of upgrading, not leap-frogging.

  19. Industry Policies Link • McKinsay Global Institute argues competitiveness policy needs to focus on all industries, not just on internationally competitive industries. • In advanced economies, most people work in services sector. Service sector productivity is key. • Industry-specific competitiveness policies must take account of sector needs. • Productivity of individual sectors more important than tilting toward correct sectors.

  20. Link

  21. Taxonomy and Policy Link • Setting the ground rules and direction • General regulatory environment • Setting broad directions • Building enablers • Expanding infrastructure, training, and R&D. • Tilting the playing field • Trade protection • Financial incentives for local production • Playing the role of principle actor. • State owned/subsidized companies.

  22. Link

  23. Industry Policy • Infrastructure: Utilities, telecoms, railroads – increasing returns to scale means unregulated markets do not lead to competitive markets. Rules of competition need to be set w/ incentives for efficiency and innovation. • Business Services – Competition plus enabling (education + R&D). • Local Services – Characterized by turnover, ground rules must allow for intense competition and entry and exit.

  24. Manufacturing: Countries have tilted manufacturing policy (protection from foreign imports, subsidies for exports, incentives for FDI) in ways successful and unsuccessful. • R & D Intensive Manufacturing – Enabling with R &D and education. Hard to successfully tilt playing field though many try since these sectors seldom succeed w/o some gov’t involvement.

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