Session 2

Economy Analysis – An Wholistic Approach

 Questions to Answer
Economy Analysis
• What is the competitive advantage of the country vis a vis it’s peers?
• Porters Diamond Framework
• Are people happy in the country?
• Happiness Index
• Inequality Level
• Unemployment Level
• How does the country compare to its peers in terms of
• Healthcare
• Education
• Demography Profile
• How is the culture impacting values in work place
• Hofstede National Culture Model and it’s six dimensions
• What is the country’s attitude to it’s societal responsibility
• ESG framework- E- Environment ; S- social – G-Governance
• How well has the government facilitated the use of technology in governance?
 Porter’s Diamond Framework
• All factors that are important in global business competition resemble the
points of a diamond.
Factor Conditions
• What are the production factors that the country has
• Basic
• Natural Resources
• Unskilled Labour
• Advance
• Skilled Knowledge
• Availability of Capital
• Infrastructure
• Advance has more value than created according to Porter
• Competitive advantage develops in nations and in particular industries that are able
to create these advanced and specialized factors.
Demand Conditions

• Deals with ‘home demand’ which affects how successful a particular industry
within a certain nation is.
• A strong home leads to large markets within the country
• More demands inevitably mean more challenges, but these challenges turn
the companies toward innovation and improvement.
• The size of the market, the growth rate of the market, etc. are some
indicators of the home demand
Related and Supporting Industries

• The level of success of one industry can be related to the success of

related and supporting industries.
• In the present economies, the role of ‘suppliers’ is a crucial one.
• These suppliers help in advancing innovation processes through shared
resources- technical and other types of aids.
• In recent times, the booming of startups has stimulated the renovation.
• These startups have entered into innumerable mergers with various
industrial giants leading to the creation of competitive advantage.
Firm Strategy, Structure, and Rivalry

• The internal environment in which a firm is established

determines how firms are created and structured.
• This structuring of the firm can be influenced by a number
of factors-
• political, economic, and social.
• This structuring will form the basis of creating a strategy
towards the establishment of the firm.
Firm Strategy, Structure, and Rivalry

• The level of competitiveness between firms of a particular

industry in one nation is marked by domestic rivalry.
• The more intense the domestic rivalry, the more it will
push firms toward innovations, improvement and global
competitiveness.
• Domestic rivalry in the automobile industry between
various Japanese firms such as Toyota, Nissan, Honda, etc.
can be cited as a perfect example.
Firm Strategy, Structure, and Rivalry

• The level of competitiveness between

• Companies in an industry
• in one nation is marked by domestic rivalry.
• The more intense the domestic rivalry, the more it will push firms
toward
• innovations,
• improvement and
• global competitiveness.
• Domestic rivalry in the automobile industry between various Japanese firms
such as Toyota, Nissan, Honda, etc. can be cited as a perfect example.
Additional Factors

• Government should induce an environment

to create advanced factors.
• Chance not originally included by Porter
includes scientific breakthrough and
catastrophes
Additional Factors

• Government should induce an environment

to create advanced factors.
• Chance not originally included by Porter
includes scientific breakthrough and
catastrophes
Are people happy in a country

• Happiness Index.
• The World Happiness Index ranks countries based on the respondents’
ratings of their own lives which also correlates it with various other life
factors
• A Global Happiness Council was formed which created a happiness
index based on several measureable factors , and has kept track of this
index ever since its first release in 2012 .
Factors impacting Happiness Index
• GDP and GDP growth rate – stability is the key
• Social Support – ability to count on friends and relatives
• Health life expectancy – number of years a child is expected to live right after
his birth
• Generosity – Practice of doing good deed beyond money
• Freedom to make life choices
• Citizen’s opinion of corruption – Is corruption widespread
Why is it important
Happy people achieve goals more efficiently.
Other Factors that measure happiness
• Global Hunger Index (GHI)
• Level of Inequality Top 1% has amassed more than 70% of total wealth
in 2017 India.
• Public Health spending less than 1% in India
• Education standards highly skewed
Culture: What is it?
• Value system
• Norms, beliefs, behaviors
• Common way of thinking
• Society’s communicable knowledge
• Society’s characteristics passed on generation by generation
General Issues in Measuring culture of a
country
• Differences in culture
• Adaptation and Acculturation
• Globalisation and its impact
• Increase in individualism in developing countries
 Hofstede’s Dimensions of Culture
Power Distance - the degree a society accepts the
unequal distribution of power in organisations and
society.
• Small - trusting, less formal organizations – United States
• Large - hierarchical organizations - Japan

Uncertainty Avoidance – is not all about risk

• Weak - diversity is appreciated, change is accepted; risk is non-threatening;
• Strong - risk averse, diversity is threatening;

Individualism
• Collectivist - belonging to groups ideal; group decision making
• Individualist - individual initiative and achievement; leadership is the ideal

Masculinity - it is not about being male or female

• Feminine - quality of life; people and relationships come first
• Masculine - performance; money and transactions come first
Demographic Dividend
India has demographic dividend what does this mean for
the country.
Younger Population
Larger number of people going to work
Higher Risk Taking
More vibrant economy ready to change