Global/International Trade

Prepared by: Bucu, Benedict Bryan S. Galaria, Ma. Teodora R. Lacerna, Von Bjon G. Perez, Deo Emmanuel A.
OM3A

COUNTRYCOMPETITIVENESS Chapter five

Competitiveness is the relative strength that one needs in order to win in competition against rivals.

CountryCompetitiveness is the extent to which a country is capable of generating more wealth than its competitors do in world mar ets. It measures and compares the effectiveness of countries in providing firms with an environment that sustains the domestic and international competitiveness of those firms.

!xample: the "ingaporean government crated several institutions and offshore #ones to help local businesses excel I international competition in the information industry.

Productivity is the value of the output produced by a unit of labor or capital. It is the prime determinant of a nation$s long% term standard of living and is the root source of national per capita income. &he core of country competitiveness.

Country- eve!"etermin#nts this fundamental includes science, education, and innovation' economic soundness' finance' and internationalization. Science$Educ#tion$#ndInnov#tion technological innovation has long been seen in all economies as central to the process of raising productivity and thus improving country competitiveness.

!xample: (nited "tates developed a rich set of institutions in both the public and private sectors to support a high level of technological innovation. EconomicSoundness is the ey economic foundation and a ma)or source of country competitiveness. It can be defines as the extent to which an economy has been e*uipped with all the economic prere*uisites for sustained economic growth. It is concerned with economic growth and stability.

!xample: expansionary public policies may initially stimulate economic growth while economic stability is reflected in a low rate of inflation.

%in#nce is an important macroeconomic fundamental affecting economic stability and growth+ and thus country competitiveness. "pecific finance indictors that affect competitiveness include currency valuation+ solvency of the banking system+ and short-term external debt.

Currencyv#!u#tion concerns the extent to which a country$s home currency is valued or priced properly to reflect the situation of mar et supply and demand pertaining to this currency.

!xample: one of the factors leading to the collapse of the &hai baht and the ,orean won in -../ involved overvaluation of their currencies.

So!vencyo&t'e(#n)in*system a wea ban ing system can be a source of instability. !xample: 0hile the 1etherlands+ 2uxembourg+ and 3ustralia are considered to have the most solvent ban s+ ban s in Indonesia and &hailand are considered the most vulnerable+ which is one of the ma)or causes of the ban ing crisis that began in the region in -../.

S'ort-terme+tern#!de(t this indicator is more relevant for a country defending its fixed exchange rate. !xample: &aiwan was not considered high ris during the 3sian financial crisis because its central ban had enough hard currency reserves to cover these liabilities.

4ong ,ong+ although recogni#ed as one of the world$s most expensive cities+ still remains competitive than s to its solid financial system+ its advanced financial mar ets+ and its position as one of the largest financial centers in the world. 4ong ,ong also en)oys very high foreign exchange reserves and also benefits from the high reserves held by mainland China.

Intern#tion#!i,#tion associated with country competitiveness refers to the extent to which the country participates in international trade and investment. It is influenced by a nation$s strength in the following areas: exports and related current account balance+ exchange rate systems+ foreign investment+ foreign exchange reserves+ and openness of the economy.

Industry- eve!"etermin#nts the industry% specific perspective is especially important for international managers because it is often a target country$s industrial+ rather than national+ environment that directly impacts firm decision and operations. !xample: (.". commercial aircraft and defense industries have dominated the world mar et+ while 5apanese semiconductors and 6C7s have led as well.

Openness refers to the extent to which its national economy is lin ed to world economies through the flow of resources+ goods+ services+ people+ technologies+ information+ and capital.

N#tion#!protectionism reflects the level of barriers that foreign goods+ capital+ services+ and other inputs of production are confronted with when moving into the focal country.

!xample: !xamples of these barriers include tariffs+ *uotas+ voluntary export restraint+ and commodity inspection standards+ among others.

&here are four broad attributes+ which individually and collectively constitute the diamond of national advantage in particular fields: %#ctorConditions this concerns the nation$s position in factors of production+ including basic factors such as labor+ capital+ land and natural resources+ and sophisticated factors such as s illed wor force+ scientific base+ infrastructure+ and information.

!xample: 4ungary$s optical instrument industry is abundant in s illed wor ers but lac s a well% developed supplier infrastructure. &he same is true for China$s copy%machine industry. 2ow design costs and growing mar et demand for copier machines are also ma)or considerations luring foreign companies such as 8erox to invest there.

"em#ndConditions this involves the nature of mar et demand for the industry$s product or service. !xample: 5apanese firms have pioneered compact+ *uiet air%conditioning units powered by energy%saving rotary compressors. &his is largely because the firms have responded to the needs of 5apanese consumers+ most of whom live in small+ crowded homes in a country where humid summers are the norm.

Re!#ted#ndSupportin*Industries this refers to the presence and support level of a nation$s suppliers or other related industries. !xample: "wit#erland$s success in pharmaceuticals evolved from previous international success in the dye industry. 4aving home%based suppliers that are international competitive can create advantages in downstream industries.

Riv#!ry#nd-usinessPr#ctice this entails the nature of domestic rivalry in addition to the conditions governing how businesses are organi#ed+ managed+ and operated in a nation.

%irm- eve!"etermin#nts the country competitiveness is also associated with firm% level factors that can characteri#e country% uni*ue organi#ational+ innovational+ and operational strategies employed by most firms of the nation. &hese strategies+ principles+ or approaches should differentiate one country$s firms from those of other countries+ and more importantly+ create competitive advantages for both the nation and firms to which they belong.

!xample: 9ost 5apanese firms have obtained their competitive advantages vis% :%vis 3merican and !uropean companies through superior process innovations+ *uality control systems+ and uni*ue manger%employee relationships.

Individu#!- eve!"etermin#nts are people or human resources associated with country competitiveness. &hey include wor ers+ entrepreneurs+ professional managers+ designers and engineers+ educators and intellectuals+ and politicians and government officials.

.or)ers wor ers$ productivity affects country productivity. !xample: " illful and diligent wor ers in "ingapore are an important force in improving its country%level productivity. In ;enmar + <inland+ and "weden+ superior education and passion for wor is an important reason for the superior productivity of wor ers.

Entrepreneurs ventures into new businesses despite a high degree of ris s arising from uncertainty about the future. &hey are a special group of businesspeople ta ing ris s in the development of new products+ new mar ets+ or new technologies. !xample: "ingapore$s high level of competitiveness can in large part be attributed to the high percentage of entrepreneurs in its total population.

M#n#*ers experienced and s illful mangers in various enterprises+ whether public+ private+ or state%owned+ play an important role in increasing country competitiveness. !xample: "everal newly industriali#ed economies such as "outh ,orea and &aiwan have successfully secured and retained a large number of 0estern%educated and experienced managers who were educated abroad. &his greatly helps to raise the level of national competitiveness in these countries.

En*ineers they stand at the forefront of country competitiveness. &hey are ey players in improving a nation$s productivity because they create value through production innovation and process innovation. !xample: !ngineers in "wit#erland and the 1etherlands have a strong educational bac ground+ industrial experience+ and global vision+ which in turn help stimulate the competitiveness of these nations.

Educ#tors they represent a prime force for strengthening education and science. 4igh competitiveness of an economy re*uires the creation and dissemination of nowledge needed for improving productivity.
Po!itici#ns the role of politicians and government officials in supporting competitiveness cannot be underestimated simply because government policies and administrative efficiency exert a significant effect on other determinants of country competitiveness.

!xample: "outh ,orea in the -./=s is a manifestation of how a national economy can benefit from political leaders with a strong commitment to economic growth even under a non%democratic regime.

Interp!#yo&t'e%our- eve!"etermin#nts country%level determinants provides an overall national foundation for developing country competitiveness. &his foundation provides a general economic and technological environment+ which can directly or indirectly influence industrial+ organi#ational+ and individual determinants of competitiveness.

!xample: 3 nation$s education system affects the *ualification of wor ers+ managers+ and engineers. Conversely+ politicians and officials have the power to change country%level determinants such as economic policies and financial systems. /overnmentRo!e through policy ma ing and intervention+ government can impact investment+ savings+ and trade.

!xample: the experiences of several newly industriali#ed nations in the early -.>=s suggest that a certain amount of governmental control over macroeconomic problems is necessary. Industri#!Po!icies can be defined as all forms of conscious and coordinated government interventions to promote industrial development. !xample: 3 government can shape factor conditions through its training and

Principles that governments should embrace in order to play a supporting role in national competitiveness: They should emphasize competitiveness infrastructure; they should deregulate competition; they should adopt strong antitrust investment; and, they should boost goal-setting that leads to sustained investment;

T0ECU TURA ENVIRONMENT Chapter six

Cu!ture the art and other manifestations of human intellectual achievement regarded collectively' the customs+ civili#ation+ and achievement of a particular time or people' the way of life of a particular society or group. &he nowledge+ beliefs+ art+ law+ morals+ customs and other capabilities of one group distinguishing it form other groups.

Culture is shared it is not an individual but a group property Culture is intangible it is not only about ?thing+@ be they products or customs+ but+ importantly+ about meaning. Culture is confirmed by others to understand it+ you need to step bac and loo at it from the outside.

Culture is correlated with other variables that vary cross%nationally. !xample: "wit#erland+ Aelgium+ and 1igeria are countries with multiple official languages. "outh ,orea has large Christian minority. 2ebanon has large Christian minority while 1orthern Ireland has both Protestant and Catholic communities.

#n*u#*e a systematic means of communicating ideas or feelings by the use of conventionali#ed signs+ gestures+ mar s+ or especially articulate vocal sounds. in*u#%r#nc# comes from the <ran s people originating in southern <rance who traded with other people in the 9editerranean who spo e a variety of languages li e 3rabic+ Italian+ Gree + "panish+ and Portuguese.

Re!i*ion contains ey values and norms that are reflected in adherents$ way of life. &he impact of religion extends to the secular segment of the population+ albeit to a lesser extent. 0o&stede1s"imensionso&Cu!ture there are four underlying dimensions+ power distance+ uncertainty avoidance+ individualism/collectivism+ and masculinity/femininity.

Po2er"ist#nce3P"4 is the extent to which hierarchical differences are accepted in society and articulated+ in the form of deference to senior echelons. !xample: Israel is very low in power distance although its income ine*uality is among the highest in the developed world. 5apan is relatively egalitarian in terms of wealth and income distribution yet is relatively high on power distance.

Uncert#intyAvoid#nce3UA4 refers to the extent to which uncertainty and ambiguity are tolerated. !xample: 5apanese car manufacturers such as 1issan lagged behind their !uropean and (.". counterparts in establishing production facilities in China. Individu#!ism5Co!!ectivism3I5C4 refers to the extent to which the self or the group constitutes the center point of identification for the individual.

M#scu!inity-%emininity3M5%4 describes the extent to which traditional masculine values such as aggressiveness and assertiveness are emphasi#ed. !xample: Consumers in feminine !uropean cultures preferred coupB cars I -..= and hatchbac s in -..C.

on*-TermOrient#tion3 TO4 originally termed ?Confusion ;ynamism@ because of its anchoring in the Confucian value system. It represents such values as thrift and persistence as well as traditional respect of social obligations. 91!s who hail from cultures high on 2&D+ are more li ely to be willing to defer return on investment for a long time.

!xample: &his tendency has often led to disregard of basic principles of economic return+ as in the case of the ,orean conglomerate ;aewoo. Criticisms of Hofstede: 3 single company$s data' &ime%dependent results' Ausiness culture+ not values' 1on% exhaustive' Partial geographic coverage' 0estern bias' 3ttitudinal rather than behavioral measures' !cological fallacy.

Sc'2#rt,1sC!#ssi&ic#tion he arrived at his classification by a conceptuali#ation of values prior to their sampling and measurement. It is more recent than 4ofstede$s.

Three dimensions of Culture according to ch!artz: Em(eddednessversusAutonomy: !mbeddedness implies emphasis on social relationships and tradition while 3utonomy implies finding meaning in one$s own uni*ueness and be encouraged to express one$s own attributes.

&wo inds of autonomy: Intellectual 3utonomy self%direction+ creativity' and+ 3ffective 3utonomy the pursuit of stimulation and hedonism. 0ier#rc'yversusE*#!it#ri#nism: 4ierarchy means legitimacy of hierarchical role and resource allocation while egalitarianism means transcendence of self%interests and promoting others$ welfare.

M#sterversus0#rmony: 9astery implies mastering the social environment via self% assertion while harmony implies being ?at peace@ with nature and society. Trompen##rs#nd0#mpden-Turner1s C!#ssi&ic#tion this classification found flowers especially in the practitioner community. &he classification consists of seven dimensions largely drawn from previous literature but validated+ according to the authors+ by large%scale practitioner surveys.

Univers#!ismversusP#rticu!#rism 3ru!esvs6re!#tions'ips4 in universal cultures+ rules are assumed to apply in all situations and legal solutions are prominent. !xample: Countries high on universalism include the (nited "tates+ Canada+ the (nited ,ingdom+ the 1etherlands+ Germany+ and the "candinavian countries.

Communit#ri#nismversus Individu#!ism3t'e*roupvs6t'e individu#!E in individualistic cultures+ people see themselves primarily as individuals+ whereas in communal cultures they see themselves as members of a group. !xample: Countries high on individualism are Israel+ Canada+ 1igeria+ 7omania+ the (nited "tates+ the C#ech 7epublic+ and ;enmar . Countries high on communitarianism are !gypt+ 1epal+

Neutr#!versusEmotion#! in neutral cultures+ interaction are impersonal and ob)ective' in emotional cultures they are laden with emotions. !xample: Countries high on neutral expression include !thiopia+ 5apan+ Poland+ and 1ew Fealand' they prefer indirect+ non% confrontational response+ and emphasi#e control. Countries high on emotional expression include ,uwait+ !gypt+ Dman+ and "pain' they prefer direct+ emotional response+ and avoid social distance.

"i&&useversusSpeci&ic in specific cultures+ interaction is confined to a narrow domain and private life is ept separate from wor . !xample: Countries high on specific involvement are (nited "tates and Germany allow more outspo en expression and encourage transparency. Countries high on diffuse involvement include 5apan+ 9exico+ and <rance.

Ac'ievementversusAscription in achievement cultures+ status is based on achievement and people are evaluated by performance. In ascriptive cultures+ status is bestowed by birth+ inship+ and age. !xample: Countries high on achievement+ (.". and Canada+ permits individuals to ma e commitments in the name of their company+ and ma e use of detailed technical data to support their position. Countries high on ascription+ ,uwait and "audi 3rabia+ ma e ample use of titles and show respect for

AttitudestoTime countries emphasi#ing the short term+ the ("+ Ireland+ and Ara#il+ plan for a shorter time hori#on than countries with long time hori#on+ Portugal and Pa istan. Attitudesto2#rdt'eenvironment countries geared toward controlling the environment+ the ("+ Israel+ and "pain+ appreciate control and dominance+ whereas countries not geared towards such control+ 6ene#uela+ 1epal+ and 7ussia+ accept that many life events cannot be

Cu!tureC!usterin* is the grouping of cultures based on their relative similarity. Ronen#ndS'en)#r is based on a synthesis of eight earlier studies. &he regions presented encompass many regions although some countries are not included. 0untin*ton based on historical and political observations+ 4untington distinguishes seven civili#ations: "inic+ 5apanese+ 4indu+ Islamic+ 0estern+ 2atin 3merican+ and 3frican.

Corpor#teCu!ture is the culture adopted+ developed+ and disseminated by a company. It is of tremendous importance+ for instance+ for an 91! that adopts a global strategy and uses corporate culture as an integrator of its various units. It can deviate from the ?national norm.@ !xample: 4onda is often described as being different from the ?typical@ 5apanese firm in that it is less immersed in traditional and more open to change.

Et'nicity significant ethnic communities exist in many countries. !xample: in the ("+ 4ispanic and various communities have been growing rapidly+ crating subcultures within the (" culture. Industry it is clear that industry is an important layer of culture. !xample: the high%tech industry is considered flexible+ informal and innovative.

"emo*r#p'ics 4ofstede found that education+ age+ seniority+ and hierarchical level strongly affected differences in values+ although not difference in practices. !xample: 7alston found the new generation of Chinese managers to be considerably more individualistic and adhere less to Confucianism than the previous generation.

Ideo!o*y an important though less stable layer of culture. !xample: In China+ 9aoist ideology provided many of the beliefs and values on the country from the mid%-.G=s to the mid% -./=s.

Cu!tur#!or-usinessEti7uette is the manner and behavior that are expected on a given situation+ be it business negotiations+ a supervisor%subordinate discussion of a raise+ or the behavior expected outside the wor place and after business hours.

Stereotypes are our beliefs about others+ their attitudes and behavior. Auto-stereotypes are how we see ourselves as a group distinguished from others. 0etero-stereotypes are how we are seen by others.

Cu!tur#!"ist#nce is a measure of the extent to which cultures differ from each other+ such measures that are typically built as an aggregate of 4ofstede$s dimensions are problematic. Conver*ence'ypot'esis assumes that combination of technology and economics is ma ing countries more ali e+ and that with global integration of mar ets and the diffusion of 91C practices+ convergence will accelerate.

"iver*ence'ypot'esis assumes that countries will continue to maintain their distinctive characteristics+ and that those differences may even be accentuated over time.

T'eend 8"
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