Professional Documents
Culture Documents
Porter
Global Competitiveness and
Competitive Advantage of Vietnam
This presentation draws on ideas from Professor Porter’s books and articles, in particular, Competitive Strategy (The Free Press, 1980); Competitive
Advantage (The Free Press, 1985); “What is Strategy?” (Harvard Business Review, Nov/Dec 1996); “Strategy and the Internet” (Harvard Business
Review, March 2001); and a forthcoming book. 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. Additional information may
be found at the website of the Institute for Strategy and Competitiveness, www.isc.hbs.edu. Version: November 18, 2008, 3pm
This presentation draws on ideas from Professor Porter’s books and articles, in particular, Competitive Strategy (The Free Press, 1980); Competitive
Advantage (The Free Press, 1985); “What is Strategy?” (Harvard Business Review, Nov/Dec 1996); “Strategy and the Internet” (Harvard Business
Review, March 2001); and a forthcoming book. 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. Additional information may
be found at the website of the Institute for Strategy and Competitiveness, www.isc.hbs.edu. Version: November 18, 2008, 3pm
• Principles of Strategy
COMPETING
COMPETING TO
TO BE
BE THE
THE COMPETING
COMPETING TO
TO BE
BE
BEST
BEST UNIQUE
UNIQUE
• Strategy as aspiration
– “Our strategy is to be #1 or #2…”
– “Our strategy is to grow…”
– “Our strategy is to be the world leader…”
– “Our strategy is to provide superior returns to our shareholders…”
• Strategy as vision
– “Our strategy is to best understand and satisfy our customers’
needs…”
– “… provide superior products and services…”
– “…to advance technology for mankind…”
6 Copyright 2007 © Professor Michael E. Porter
Vision Statements
Autodesk
Transforming business by design
Avon
To be the company that best understands and satisfies the product, service and
self-fulfillment needs of women – globally.
Lafarge
To be the undisputed world leader in building materials
Relative
Relative Position
Position
Industry
Industry Within
Within the
the
Structure
Structure Industry
Industry
30%
27.8% ‘Invested capital less
Return on 25% excess cash’ is the
Invested average of the
Capital beginning period and
1993-2007 20% the ending period
values. Excess cash is
calculated by
15%
13.6% subtracting cash in
10.5% excess of 10% of
10% annual revenue.
5%
0%
Revlon Paccar
Industry Average
Threat of Substitute
Products or Services
Threat of New
Entrants
Threat
Threat of
of Substitute
Substitute
Products
Products or
or
Services
Services
• Railroads
• Water transportation
Bargaining Rivalry
Rivalry Among
Among Bargaining
Bargaining Power
Power
Bargaining Power
Power
of Existing
Existing of
of Buyers
Buyers
of Suppliers
Suppliers
Competitors
Competitors
• Large independent • Heavy price • Large fleets
suppliers of engines competition on • Leasing companies
and drive train standardized models • Small fleets and owner
components operators
• Unionized labor
Threat
Threat of
of New
New
Entrants
Entrants
• Focus on owner-operators
Threat
Threat of
of Substitute
Substitute
Products
Products oror Services
Services
• Go direct
• Use retail / warehouse channels
Rivalry
Rivalry Among
Among Bargaining
Bargaining Power
Power
Bargaining
Bargaining Power
Power of
of Existing
Existing of
of Buyers
Buyers
Suppliers
Suppliers Competitors
Competitors
• Food processors • Distributors • Restaurants
• Food cooperatives –Purchasing • Schools
• Farmers –Warehousing • Hospitals
–Delivery
• Cafeterias
• Other food service
Threat
Threat of
of New
New establishments
Entrants
Entrants
Differentiation
(Higher Price)
Competitive
Competitive
Advantage
Advantage
Lower Cost
Firm Infrastructure
(e.g. Financing, Planning, Investor Relations)
Primary Activities
Firm Infrastructure
(e.g. Financing, Planning, Investor Relations)
Primary Activities
• There are different ways of configuring the value chain in the same industry
Firm Infrastructure
(e.g. governance, planning, budgeting, information tech., facilities)
Fundraising
(e.g. earned revenues, proposals, solicitations, events, donor relations)
Human Resource Management
(e.g. recruiting, training, compensation system)
Program and Content Development S
(e.g. scholarship, exhibit design, market research)
u
Educational Programs r
(e.g. local school outreach, adult classes, special tours)
p
Social
Benefits
Assembly and Exhibition Hospitality Marketing Visitor / l
Preservation Services & Sales Constituency u
Services s
(e.g., acquisition, (e.g., curating, (e.g., shops, (e.g., (e.g., member
authentication, display, support restaurants, promotion, outreach,
cataloguing) materials) maintenance) advertising, special events)
catalogs)
• Principles of Strategy
Operational Strategic
Effectiveness Positioning
•• A
A unique
unique value
value proposition
proposition
compared
compared to
to other
other organizations
organizations
•• A
A different,
different, tailored
tailored value
value chain
chain
•• Clear
Clear tradeoffs,
tradeoffs, and
and choosing
choosing what
what
not
not to
to do
do
•• Activities
Activities in
in the
the value
value chain
chain that
that fit
fit
together
together andand reinforce
reinforce each
each
other
other
•• Strategic
Strategic continuity
continuity with
with continual
continual
improvement
improvement in
in realization
realization
• Young, first time, or price-sensitive buyers who • Modular, ready-to-assemble, easy to package
want stylish, space efficient and scalable designs
furniture and accessories at very low price • In-house design of all products
points. • Wide range of styles displayed in huge
warehouse stores with large on-site inventories
• Self-selection
• Extensive customer information in the form of
catalogs, explanatory ticketing, do-it-yourself
videos, and assembly instructions
• Ikea designer names attached to related
products to inform coordinated purchases
• Long hours of operation
• Suburban locations with large parking lots
• On-site, low-cost, restaurants
• Child care provided in the store
• Self-delivery by most customers
What
What Which
Which
Customers?
Customers? Needs?
Needs?
What
What Relative
Relative
Price?
Price?
• Premium? Discount?
Distinctive
Distinctive
Value
Value Proposition
Proposition Activities
Activities
• Home-city replacement cars for drivers • Numerous, small, inexpensive offices in each
whose cars are being repaired or who need metropolitan area, including on-premises offices at
major accounts
an extra vehicle, at low rates (30% below
airport rates) • Open during daylight hours
• Deliver cars to customers’ homes or rental sites,
or deliver customers to cars
• Acquire new and older cars, favoring soon-to-be
discontinued older models
• Keep cars six months longer than other major
rental companies
• In-house reservations
• Grassroots marketing with limited television
• Cultivate strong relationships with auto
dealerships, body shops, and insurance adjusters
• Hire extroverted college graduates to encourage
community interaction and customer service
• Employ a highly sophisticated computer network
to track the fleet
Sources of Tradeoffs
– Incompatible product or service features / attributes
– Differences in the best configuration of activities in the value chain to
deliver the chosen value proposition
– Inconsistencies in image or reputation across positions
– Limits on internal coordination, measurement, motivation, and control
IKEA
IKEA Typical
Typical Furniture
Furniture Retailer
Retailer
Product Product
• Low-priced, modular, ready-to-assemble • Higher priced, fully assembled products
designs
• No custom options • Customization of fabrics, colors, finishes,
and sizes
• Furniture design driven by cost, • Design driven by image, materials, varieties
manufacturing simplicity, and style
•• “Key”
“Key”Success
SuccessFactors
Factors
•• “Core”
“Core”Competencies
Competencies
•• “Critical”
“Critical”Resources
Resources
Wide
range of Global
styles team of
trend-
spotters
Very
Majority of Advanced
Little media frequent
production production
advertising product machinery
in Europe
changes
Extensive
use of
Prime store store sales
locations in data
high traffic Very
areas Tight
flexible
coordination
JIT delivery with 20 production
wholly-owned system
factories
• Reinvention and frequent shifts in direction are costly and confuse the
customer, the industry, and the organization
• Continuity of strategy allows learning and change to be faster and more effective
Internal Practices
Source: Draws on research conducted at the Institute for Strategy and Competitiveness and interviews conducted with a former Neutrogena executive.
Distinctive
Distinctive
Value
Value Proposition
Proposition Activities
Activities
• Leaders should not assume that subordinates understand the strategy, or that
they agree with it
– Help each organizational unit translate the strategy into implications for its own
mandate
• Individuals who do not ultimately accept the strategy cannot have an ongoing
role in the company
• Measure progress against the strategy using metrics that capture the
implications of the strategy for serving customers and performing particular
activities
• Sell the strategy and how to evaluate progress against the strategy to the
financial markets
• Refocus on strategy
• Use the downturn to get things done that would be more difficult in normal times
• Position for long term economic performance, not near term stock price
This presentation draws on ideas from Professor Porter’s books and articles, in particular, Competitive Strategy (The Free Press, 1980); Competitive
Advantage (The Free Press, 1985); “What is Strategy?” (Harvard Business Review, Nov/Dec 1996); “Strategy and the Internet” (Harvard Business
Review, March 2001); and a forthcoming book. 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. Additional information may
be found at the website of the Institute for Strategy and Competitiveness, www.isc.hbs.edu. Version: November 18, 2008, 3pm
• The next several years will determine whether Vietnam will follow the
experience of Korea, or the Philippines
Singapore (6.16%)
China
60%
Iceland
Norway
Thailand Vietnam
55% Canada Hong Kong
Portugal Australia
Japan Sweden Russia
Germany Czech Rep. New Zealand Ireland
Latvia
50% USA UK Finland
South Korea Spain
Brazil Slovakia
Lithuania Taiwan
Indonesia
India Slovenia
45% France
Poland Bangladesh
Romania Chile
Austria
Italy Hungary
Colombia Mexico Argentina
40% Malaysia
Sri Lanka Philippines
Nicaragua
Morocco
35%
Bulgaria
Turkey
Pakistan
30%
-3% -2% -1% 0% 1% 2% 3% 4% 5% 6%
Change in Labor Force Participation Rate, 2003-2007
Source: Economist Intelligence Unit (2008)
48 Copyright 2007 © Professor Michael E. Porter
GDP per employee
Comparative Labor Productivity
(PPP adjusted US$), Selected Countries
2007
USA
Hong Kong
Ireland
France
Norway Finland
UK Sweden
Australia
Canada Denmark Singapore
Italy Austria Japan Taiwan Estonia
Iceland
Germany Israel
Switzerland South Korea
Spain Greece
New Zealand Slovenia
8%
6%
4%
2%
0%
-2%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: Ohno (2008)
50 Copyright 2007 © Professor Michael E. Porter
Domestic Fixed Investment Rates
Gross Fixed Investment Selected Countries
as % of GDP (2007)
36%
China (40.4%) Latvia
India
34% Vietnam
32% Estonia
Croatia Spain
30% Kazakhstan
Korea Slovenia Sri Lanka Iceland
28%
Australia Slovakia
Romania
Thailand
Lithuania
26% Colombia
Singapore Greece Indonesia
Ireland Venezuela
24% Czech Republic Tunisia
Japan Argentina
New Zealand Ukraine Denmark
Canada Poland
22% Portugal Malaysia Italy Mexico Cambodia Egypt Pakistan
Hungary Austria France Russi Turkey
20% Hong Kong Chile Finland aKenya South Africa
Netherlands
Saudi Arabia Norway Sweden
18% Germany UK Brazil
Dominican Republic
16%
USA
Philippines
14%
-4% -2% 0% 2% 4% 6% 8% 10% 12%
Portugal Cambodia
40% UK
Spain Thailan Philippines
Australi Canad d Latvia
a
South Africa a Poland Iceland (46.7%)
Finland Lithuania France Israel
30% Colombia
Laos Mexico
Norway Austria
Slovenia Brazil Russia
20% Germany Turkey
Greece Italy Malaysia
South Korea USA Saudi
China Pakista
10% Indonesia Arabia
n
Indi
Japan a
0%
-5% 0% 5% 10% 15% 20% 25% 30% 35% 40%
FDI Inflows as % of Gross Fixed Capital Formation, Average 2003 - 2007
Source: UNCTAD, World Investment Report (2007)
52 Copyright 2007 © Professor Michael E. Porter
Export Performance
Exports as Share of
GDP (in %, 2007)
Selected Countries
100%
Malaysia (116.4%)
90% Slovakia
Belgium Hungary
Czech Republic
Ireland
80%
Thailand Estonia
Netherlands Vietnam
70% Slovenia Slovenia
Cambodia
60% Bulgaria
Austria
Saudi Arabia Lithuania
Switzerland
50% Kazakhstan Croatia Philippines
Tunisia South Korea
Latvia Finland Germany
Ukraine Norway Chile
40% South Africa Poland China
Egypt
Canada Russia Indonesia
Sri Lanka France Portugal
30% Venezuela Mexico
New Zealand Italy
Dominican Republic Argentina UK
Turkey Colombi
20% India Bangladesh
Australia Spain a
Pakistan Brazil Japan
USA
10%
0%
-15% -10% -5% 0% 5% 10% 15% 20% 25% 30%
Change of Exports as Share of GDP, 2003 to 2007
0,6%
0,5%
0,4%
0,3%
0,2%
0,1%
0,0%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: UNComTrade, WTO (2008)
54 Copyright 2007 © Professor Michael E. Porter
Vietnam’s Cluster Export Portfolio
2000-2006
5%
Change In Vietnam’s Overall Footwear (5.68%, 1.91%)
Growth In World Export Share:
0.25%
Fishing and Fishing
Products
4%
Vietnam’s world export market share, 2006
3%
2% Appare
l
Furnitur
1% Textiles e
Plastics
Vietnam’s Average World
Tobacco Export Share: 0.31%
0%
-0,3% -0,1% 0% 0,1% 0,3% 0,5% 0,7% 0,9% 1,1% 1,3% 1,5%
Change in Vietnam’s world export market share, 2000 – 2006
Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Exports of US$1.1 Billion
Business School; Richard Bryden, Project Director. Underlying data drawn from the UN Commodity Trade Statistics Database and the =
IMF BOP statistics. 55 Copyright 2007 © Professor Michael E. Porter
Agenda
Macroeconomic Competitiveness
Social
Infrastructure Macroeconomic
and Political Policies
Institutions
Natural Endowments
$3,000
Denmark
Ireland
United Kingdom Germany Sweden
Italy Japan / Belgium / France
AustriaNetherlands
$1,000 Spain New Zealand
Greece Australia
Slovenia Taiwan
Portugal Cyprus Singapore
Korea
Poland Slovakia Czech Republic
$500 Hungary
Estonia
Lithuania
Romania Latvia
Malaysia
$50
Cambodia
Vietnam
$0
Source: Global Competitiveness Report, 2008; EuroStat, 2008; Philippines Department of Labor and Employment,
2008 59 Copyright 2007 © Professor Michael E. Porter
Rate of Competitiveness Improvement
Low Income Countries, 2002 - 2007
BCI Value, 2007
High
India
Indonesia
Sri Lanka
El Salvador Vietnam
Pakistan
Tanzania Nigeria Gambia Honduras
Uganda Mali
Madagascar
Zambia Zimbabwe Nicaragua
Ethiopia
Mozambique Bangladesh
Paraguay Bolivia
Low
Chad
Below average Average Above average
• Rule of law
– Judicial independence
– Efficiency of legal framework
– Civil rights
– Business costs of corruption
– Reliability of police
– Prevalence and costs of crime
Index of
Governance
Quality,
2007
Worst
country in
the world
an
ia
nd
h
a
ia
a
sia
a
m
ka
n
n
il
os
s
e
a
az
es
re
ta
n
si
ne
pa
or
di
d
es
na
la
iw
an
hi
La
ay
In
us
bo
kis
Ko
Br
ap
ad
pi
Ja
ai
on
et
Ta
iL
R
al
ilip
am
Th
Pa
ng
l
Vi
h
ng
M
Sr
In
ut
Ph
Si
Ba
So
Note: Sorted left to right by decreasing average value across all indicators. The ‘zero’ horizontal line corresponds to the median country’s average value across all
indicators.
63 Copyright 2007 © Professor Michael E. Porter
Source: World Bank (2008)
Corruption Perception Index, 2007
1 Finland New Zealand
Deteriorating Iceland Sweden Improving
Switzerland
Low Canada Norway
corruption UK
Hong Kong Austria Germany
Ireland Japan
United States France
Chile Spain Uruguay
Portugal Estonia Slovenia
Israel Taiwan
Hungary Czech Republic
Italy Malaysia South Korea
South Africa
Lithuania Slovakia Latvia
Rank in Jordan
Global Greece
Tunisia Poland
Corruption Croatia Turkey
Index, Colombia Romania
2007 Peru Brazil Mexico China India
Senegal
91 Venezuela Bangladesh
Note: Ranks only countries available in both years (91 countries total)
Source: Global Corruption Report, 2007
64 Copyright 2007 © Professor Michael E. Porter
Microeconomic Competitiveness: Quality of the
Business Environment
Context
Contextforfor
Firm
Firm
Strategy
Strategy
and
andRivalry
Rivalry
Note: Rank versus 130 countries; overall, Vietnam ranks 102nd in 2008 PPP adjusted GDP per capita and 76th in New Global Competitiveness
Source: Institute for Strategy and Competitiveness, Harvard University (2008)
66 Copyright 2007 © Professor Michael E. Porter
Rank (157
Openness to Trade
countries) Selected Countries, 2008
160
140
Vietnam
120
100
80
60
40
20
0
New Zealand
Germany
Indonesia
Hong Kong
Sri Lanka
Japan
India
Vietnam
United States
Brazil
South Korea
Singapore
Taiwan
China
Cambodia
Russia
Philippines
Laos
Malaysia
Pakistan
Thailand
•• Access
Accesstotofinance
finance(rank
(rank109)
109)
––E.g.,
E.g.,financial
financialmarket
marketsophistication
sophistication
•• Innovation
Innovationinfrastructure
infrastructure(rank
(rank99)
99)
––E.g., patents per capita
E.g., patents per capita
•• Logistical
Logisticalinfrastructure
infrastructure(rank
(rank96)
96)
––E.g., quality of roads
E.g., quality of roads
Note: Rank versus 130 countries; overall, Vietnam ranks 102nd in 2008 PPP adjusted GDP per capita and 76th in New Global Competitiveness
Source: Institute for Strategy and Competitiveness, Harvard University (2008)
68 Copyright 2007 © Professor Michael E. Porter
Cost of Doing Business
Ranking, 2008
(of 181 countries)
Favorable
Vietnam, 2008 Unfavorable
Median Ranking,
East Asia and Pacific
Food
Food Local
Local
Suppliers
Suppliers Attractions
Attractions and
and Transportation
Transportation
Restaurants Activities
Activities
Restaurants e.g.,
e.g., theme
theme parks,
parks,
casinos, sports
casinos, sports
Property
Property Souvenirs,
Souvenirs,
Services
Services Duty
Duty Free
Free
Airlines,
Airlines,
Hotels
Hotels Banks,
Banks,
Maintenance
Maintenance Cruise
Cruise Ships
Ships
Foreign
Foreign
Services
Services Exchange
Exchange
Government
Government agencies
agencies Educational
Educational Institutions
Institutions Industry
Industry Groups
Groups
e.g.
e.g. Australian
AustralianTourism
Tourism Commission,
Commission, e.g.
e.g. James
James Cook
Cook University,
University, e.g.
e.g. Queensland
Queensland Tourism
Tourism
Great
Great Barrier
Barrier Reef
Reef Authority
Authority Cairns
Cairns College
College of
of TAFE
TAFE Industry
Industry Council
Council
Sources: HBS student team research (2003) - Peter Tynan, Chai McConnell, Alexandra West, Jean Hayden
71 Copyright 2007 © Professor Michael E. Porter
Vietnam’s Cluster Export Portfolio
2000-2006
5%
Change In Vietnam’s Overall Footwear (5.68%, 1.91%)
Growth In World Export Share:
0.25%
Fishing and Fishing
Products
4%
Vietnam’s world export market share, 2006
3%
2% Appare
l
Furnitur
1% Textiles e
Plastics
Vietnam’s Average World
Tobacco Export Share: 0.31%
0%
-0,3% -0,1% 0% 0,1% 0,3% 0,5% 0,7% 0,9% 1,1% 1,3% 1,5%
Change in Vietnam’s world export market share, 2000 – 2006
Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Exports of US$1.1 Billion
Business School; Richard Bryden, Project Director. Underlying data drawn from the UN Commodity Trade Statistics Database and the =
IMF BOP statistics. 72 Copyright 2007 © Professor Michael E. Porter
Vietnam’s Cluster Export Portfolio cont’d
2000-2006
1,0%
Change In Vietnam’s Overall
Growth in World Export Share:
0.25%
0,8%
Vietnam’s world export market share, 2006
Agricultural Products
Leather and Related Products
Textiles
0,4%
Sporting, Recreational
and Children's Goods Vietnam’s Average
Construction Materials
World Export
Total Communications Equipment Share: 0.31%
Services
Processed Foods
Publishing and Printing Lighting and Electrical Equipment
0,2% Chemical Products Motor Driven
Medical Devices
Forest Products
Products
Information Power and Power Generation Equipment
Entertainment
Technology Prefabricated Enclosures and Structures
Jewelry, Precious Metals and Collectibles Metal Mining and Manufacturing
Analytical Instruments Production Technology
Biopharmaceuticals Automotive
0,0%
-0,10% -0,05% 0,00% 0,05% 0,10% 0,15% 0,20% 0,25% 0,30%
Change in Vietnam’s world export market share, 2000 – 2006
Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Exports of US$1.1 Billion
Business School; Richard Bryden, Project Director. Underlying data drawn from the UN Commodity Trade Statistics Database and the =
IMF BOP statistics. 73 Copyright 2007 © Professor Michael E. Porter
Not reported Share of World Exports by Cluster
< 0.07%
Vietnam, 2000
0.07 – 0.15%
Fishing &
0.16 – 0.31% Textiles
Fishing Entertainment
Hospitality Prefabricated
0.31 – 0.62% Products Enclosures
& Tourism
Agricultural
0.62- 1.24% Products
Transportation
> 1.24% Building Furniture
& Logistics
Distribution Aerospace Fixtures, Construction
Services
Information Vehicles & Equipment & Materials
Defense
Tech. Lightning &Services Processed
Jewelry & Heavy
Business Construction Food
Services Analytical Electrical
Precious Services
Education & Instruments Equipment
Metals Knowledge Medical Forest
Power
Creation Communi- Generation Products
Financial Devices
Services cations
Publishing
& Printing Biopharma- Equipment Heavy
Machinery
ceuticals Motor Driven Production
Chemical Products Technology
Apparel
Products Tobacco
Leather & Oil & Automotive
Related Gas Aerospace Metal
Plastics Engines Manufacturing
Products
Footwear Marine
Sporting
& Recreation Equipment
Goods
Note: Clusters with overlapping borders have at least 20% overlap (by number of industries) in both
directions.
74 Copyright 2007 © Professor Michael E. Porter
Not reported Share of World Exports by Cluster
< 0.07%
Vietnam, 2006
0.07 – 0.15%
Fishing &
0.16 – 0.31% Textiles
Fishing Entertainment
Hospitality Prefabricated
0.31 – 0.62% Products Enclosures
& Tourism
Agricultural
0.62- 1.24% Products
Transportation Building Furniture
> 1.24% & Logistics
Distribution Aerospace Fixtures, Construction
Services
Information Vehicles & Equipment & Materials
Defense
Tech. Lightning &Services Processed
Jewelry & Heavy
Business Construction Food
Services Analytical Electrical
Precious Services
Education & Instruments Equipment
Metals Knowledge Medical Forest
Power
Creation Communi- Generation Products
Financial Devices
Services cations
Publishing
& Printing Biopharma- Equipment Heavy
Machinery
ceuticals Motor Driven Production
Chemical Products Technology
Apparel
Products Tobacco
Leather & Oil & Automotive
Related Gas Aerospace Metal
Plastics Engines Manufacturing
Products
Footwear Marine
Sporting
& Recreation Equipment
Goods
Note: Clusters with overlapping borders have at least 20% overlap (by number of industries) in both
directions.
75 Copyright 2007 © Professor Michael E. Porter
Geographic Levels and Competitiveness
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
ConstructionMaterials
Materials
Equipment
Equipment and
and Leather
Leatherand
andSporting
SportingGoods
Goods Transportation
Power Generation Transportationand
andLogistics
Logistics
Services
Services Power Generation Houston
Houston Business
Education BusinessServices
Services
Entertainment
Entertainment Educationand
andKnowledge
Knowledge Oil
Oiland
andGas
GasProducts
Productsand
andServices
Services
Creation
Creation Chemical
ChemicalProducts
Products
Heavy
HeavyConstruction
ConstructionServices
Services
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, 11/2006.
77 Copyright 2007 © Professor Michael E. Porter
Vietnam Provincial Competitiveness Index, 2006
Excellent
High Performing
Mid-high
Average
Mid-low
Low Performing
Factor
Factor Context
Contextfor
for Related
Relatedand
and Regional
Regional
Demand
Demand Macroeconomic
Macroeconomic
(Input)
(Input) Strategy
Strategy Supporting
Supporting Strategy
Strategy&&
Conditions
Conditions Competitiveness
Competitiveness
Conditions
Conditions and
andRivalry
Rivalry Industries
Industries Governance
Governance
Factor -Driven
Factor-Driven Investment
Investment-- Innovation
Innovation--
Economy
Economy Driven
Driven Economy
Economy Driven
Driven Economy
Economy
Source: Porter, Michael E., The Competitive Advantage of Nations, Macmillan Press, 1990
82 Copyright 2007 © Professor Michael E. Porter
Competitiveness Action Agenda: Key Priorities
• Impose regulatory
attractiveness
Action priorities
• Reduce the potential for corruption through simplified regulations, use
of modern information technology, and improved SOE governance/
privatization
• Set clear guidelines and reporting requirements for management of
SOEs
• Demonstrate a commitment for transparency, including support for a
strong press
84 Copyright 2007 © Professor Michael E. Porter
Improving Infrastructure
Action priorities
• Establish a national fund for key infrastructure projects to be
implemented under the supervision of the Prime Minister’s office
• Utilize matching funds incentives to improve effectiveness if
investments by provincial governments
• Create a public-private council to advise on spending priorities
Action priorities
• Continue opening financial markets in line with WTO commitments
• Create an effective, independent financial regulator, using outside
help as needed
• Establish a development bank to develop financing tools for private
SMEs
86 Copyright 2007 © Professor Michael E. Porter
Regulatory Reform
Action priorities
• Aggressively pursue the work on regulatory reform initiated with
foreign donors
• Improve institutional capacity to evaluate and administer regulations,
not just the rules themselves
• Include an obligatory assessment of the administrative burden on
business in the process of introducing new laws and regulations
87 Copyright 2007 © Professor Michael E. Porter
Human Resource Development
• The number of universities has increased but quality is low and skills
do not match company needs
Higher • Higher university education standards must be set and enforced,
education drawing on international experts
• Vietnam needs to develop a plan and enabling institutions for
assimilation of global technology
• The creation of SOE groups is not a solution and can exacerbate problems if
no other reforms are being implemented
89 Copyright 2007 © Professor Michael E. Porter
Cluster Development in Vietnam
• Vietnam’s clusters currently tend to be narrowly focused on
individual products
• Policy should upgrade all existing and emerging clusters, not choose
among them
90 Copyright 2007 © Professor Michael E. Porter
Clusters and Economic Policy
Science and Technology
Education and Investments
Workforce Training (e.g., centers, university
departments,
Management Training technology transfer)
Clusters
Export Promotion Market Information
and Disclosure
Environmental
Industrial parks and Stewardship
free trade zones
Physical Natural Resource
Infrastructure Protection
Develop
DevelopRelated
RelatedClusters
Clusters
Turn
TurnNiche
NicheProducts
ProductsInto
Into Build
BuildClusters
ClustersAround
Around
Deepen
DeepenExisting
ExistingClusters
Clusters Clusters
Clusters MNCs
MNCs
Upgrade
UpgradeExisting
ExistingExport
Export
Products and Services
Products and Services
Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business
School; Richard Bryden, Project Director. Underlying data drawn from the UN Commodity Trade Statistics Database.
93 Copyright 2007 © Professor Michael E. Porter
Agenda
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
National
NationalValue
ValueProposition
Proposition
Achieving
Achievingand
andMaintaining
MaintainingParity
Parity
Developing
DevelopingUnique
UniqueStrengths
Strengths with
withPeers
Peers
• What elements of context and the • What weaknesses must be addressed to
business environment are crucial achieve parity with peer countries?
priorities?
• What existing and emerging clusters
should be developed first?
• The legal and business risks are great for companies engaging in
practices deemed unacceptable
Economic Social
Objectives Objectives
Social Benefits
Social Value =
Resources Expended
• Every activity in the value chain touches on communities in the locations where a
company operates. These impacts can be positive
108
or negative.
Copyright 2007 © Professor Michael E. Porter
Identifying Shared Value
Outside-In Social Impact on the Company
• Fair and open local competition (e.g., the
absence of trade barriers, fair regulations)
• Availability of qualified human resources • Intellectual property protection
(Marriott’s job training) • Transparency (e.g., financial reporting,
• Access to specialized training programs corruption: Extractive Industries
• Efficient physical infrastructure Transparency Initiative)
• Efficient permitting and regulatory practices • Rule of law (e.g., security, protection of
• Availability of scientific and technological property, legal system)
Context
Context for
for • Meritocratic incentive systems (e.g.,
institutions (Microsoft’s Working Connections;
Nestlé’s knowledge transfer to farmers)
Firm
Firm Strategy
Strategy antidiscrimination)
• Sustainable access to natural resources and
and Rivalry
Rivalry
(GrupoNueva’s water conservation)
• Efficient access to capital
Factor
Factor Demand
Demand
(Input)
(Input) Conditions
Conditions
Conditions
Conditions
Social Dimensions
Generic Value Chain Social
of Competitive
Social Impacts Impacts
Context
• The impact of CSR is greatest when responsive CSR, value chain social
impacts, and investments in competitive context are integrated
110 Copyright 2007 © Professor Michael E. Porter
Strategic CSR: ChoicePoint
• Using these principles, businesses can have a greater impact on social good
than any other institution or philanthropic organization
113 Copyright 2007 © Professor Michael E. Porter