International Business

Topic
Country Competitiveness

Topic : Country Competitiveness

Do You Know?
• Why do countries differ in their overall competitiveness? • Why is a country’s competitiveness more salient in some industries? • What roles should firms and individuals play in shaping country competitiveness? • How does a foreign country’s competitiveness influence the MNEs?
topic: Country Competitiveness

Defining Country Competitiveness
• Competitiveness is a relative strength necessary to win in competition against industry rivals. • Country Competitiveness is the extent to which a country is capable of generating wealth, when measured against other countries, in world markets. • To be competitive, governments must create and sustain a domestic and international competitive environment that favors business operations and productivity in one or more industries.
Topic : Country Competitiveness

Defining Country Competitiveness
• Productivity is important to competitiveness. • Productivity is the value of the output by a unit of labor or capital. • It is the prime determinant of a country’s standard of living, and the main source of national income. • Productivity depends on the quality and features of products and the efficiency with which they are produced. • Productivity does not come from what a country has, but from how it uses those resources.
Topic : Country Competitiveness

Country Competitiveness and MNEs
• The following contribute to country competitiveness:
– Government policies, national values, national culture, economic structures, economic and governmental institutions, and national histories

• Nations have become influential in international business operations. • Most governments have institutions that promote economic development by marketing competitiveness factors to Multinational Enterprises.
Chapter 5: Country Competitiveness

Country Competitiveness and MNEs
• Examples of governmental promotion include:
– Italy’s promotion of resources, histories, and capabilities for shoe and leather production. – Japanese promotion of culture, history, and capabilities in semiconductor and electronics production. – Swedish promotion of history and culture related to concern for people and product safety.
Topic : Country Competitiveness

Country Competitiveness and MNEs
• Country competitiveness affects selection for operations locations. • Competitiveness impacts the industry selection of an MNE. • Competitiveness affects MNE innovation capacity and capability production. • Competitiveness affects MNE global strategy.
Topic : Country Competitiveness

Country-Level Determinants
• Competitiveness improves when countries enhance their productivity capabilities, driven by the following factors:
– – – – – – – – Country-level Industry-level Firm-level IndividualScience, education, and innovation Economic soundness Finance Internationalization

• Country-level fundamentals include:

Topic : Country Competitiveness

Country-Level Determinants
Exhibit 5-1: Determinants of country competitiveness

Chapter 5: Country Competitiveness

Country-Level Determinants
Exhibit 5-2: Country-level determinants of country competitiveness

Chapter 5: Country Competitiveness

Science, Education, and Innovation
• Countries promote technological innovation through establishing institutions that make tech innovation more likely. • This is done by:
– Developing basic scientific capability and R&D – Supporting educational institutions that research, teach and support economic development – Supporting technological innovation through economic and governmental policy.

Topic : Country Competitiveness

Macroeconomic Soundness
• Countries try to develop sustainable economic growth potential. • They do this through creating policy that promotes:
– Investment, consumption, growth in real income, service and production sector performance, and infrastructure development.

• Essentially, they promote consumption, investment, government spending and net exports in order to build economic stability favoring international economic growth.
Chapter 5: Country Competitiveness

Macroeconomic Soundness
Exhibit 5-3: The strength of macro-level domestic economy (Top 20)

Chapter 5: Country Competitiveness

Finance
• Countries try to develop financial sectors that invite international investment. • They do this through:
– Managing appropriate currency valuation – Promoting solvency in the banking systems – Managing appropriate levels of short-term external debt

Topic : Country Competitiveness

Internationalization
• Internationalization refers to the extent to which a country participates in international trade and investment. • Promoting internationalization is done through:
– – – – – Building positive export balances Establishing workable exchange rate systems Building financial and direct investment Keeping high foreign exchange reserves Promoting economic and cultural openness

Topic : Country Competitiveness

Internationalization
• Openness refers to the ease of which resources, goods, services, people, labor, technology, information and capital flow across boundaries. • In order to promote openness
– Countries seek to negotiate lower trade barriers and protectionism, – While promoting cultural acceptance of “global mindsets” among the population
Chapter 5: Country Competitiveness

Industry-Level Determinants
• Four broad attributes constitute national advantage
– Factor Conditions
• The nation’s position in factors of production, including labor, capital, land, and natural resources. • The nation’s position in more sophisticated factors, such as skilled workforce, scientific base, infrastructure and information

– Demand Conditions
• The nature of market demand for the industry’s product or service.
Chapter 5: Country Competitiveness

Industry-Level Determinants
• Four broad attributes constitute national advantage
– Related and Supporting Industries
• The presence and support of a nation’s suppliers or other related industries • Cluster – when suppliers, manufacturers and distributors are located near each other

– Rivalry and Business Practice
• The nature of domestic rivalry in addition to the conditions governing how business are organized, managed and operated in a country
topic : Country Competitiveness

Industry-Level Determinants
Exhibit : Industry-level determinants of country competitiveness

Topic : Country Competitiveness

Industry-Level Determinants
Exhibit : The microeconomic competitiveness scoreboard (Top 20)

topic: Country Competitiveness

Firm-Level Determinants
• These strategies, principles, or approaches differentiate one country’s firms from those of others. • Include technological innovation and organizing principles. • Inevitably diffused across nations and imitated by foreign rivals.

topic: Country Competitiveness

Firm-Level Determinants
Exhibit 5-6: Firm-level determinants of country competitiveness

Chapter 5: Country Competitiveness

Individual-Level Determinants
• People or human resources associated with country competitiveness:
– Workers – Entrepreneurs – Managers – Engineers – Educators – Politicians – Interplay of the Four-Level Determinants
Chapter 5: Country Competitiveness

Individual-Level Determinants
Exhibit : Individual-level determinants of country competitiveness

Topic : Country Competitiveness

Government Role
• Governments can affect country competitiveness
– Policy making and intervention – Trade liberalization and exchange rate adjustment

• Industrial policies – all forms of coordinated government interventions to promote industrial development:
– Import protection, financial subsidies, regulatory changes, training and infrastructure policies
Topic : Country Competitiveness

Government Role
• To play a supporting role in national competitiveness, governments should:
– Emphasize competitiveness infrastructure – Enforce strict product, safety, and environmental standards – Deregulate competition – Adopt strong domestic antitrust policies – Boost goal-setting that leads to sustained investment
Topic : Country Competitiveness

Country Competitiveness: Putting it Together
This chapter is cumulative. To establish superior country competitiveness, one must promote all of the following:  Country Level Competitiveness  Industry Level Competitiveness  Firm Level Competitiveness  Individual Level Competitiveness  Government Policy That Supports The Above, And Is Acceptable To The Population.

Country Competitiveness: Putting it Together
THIS IS ALL TOUGHER THAN IT LOOKS!! Can you imagine why??

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