how do we remain competitive in a globalised world?

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Presented by: Dr. Peter Larose

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How Do We Remain Competitive in a Globalised World?. Presented by: Dr. Peter Larose. Definition of Competitiveness With the globalization phenomenon, the increased mobility of corporate assets, and the requirement to recruit productive human resources, this question is - PowerPoint PPT Presentation

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Page 1: How Do We  Remain  Competitive  in a  Globalised World?

Presented by: Dr. Peter Larose

Page 2: How Do We  Remain  Competitive  in a  Globalised World?

Definition of Competitiveness

With the globalization phenomenon, the increased mobility of corporate assets, and the requirement to recruit productive human resources, this question is becoming very difficult to answer.

When economic and financial data of a particular country is used to compare withanother country’s, the analyst must be very careful with its consistency.

Various countries employ different terminology to compare its competitiveness withthe rest of the world. There is no “one finite” set of data, which provides for thefull meaning of competitiveness.

Competitiveness would involve a series of factors to be considered:(a) Size -effect(b) Population at a particular point in time(c) Factors of Productions (e.g. land, labour, capital, & time)(d) Use of New Technology(e) Macro-economic policies (e.g. financial performance)(f) External Factors

Page 3: How Do We  Remain  Competitive  in a  Globalised World?

The OECD defines competitiveness as

"The degree to which a country can, under free and fair market conditions, produce goods and services which meet the test of international markets, while simultaneously maintaining and expanding the real incomes of its people over the long-term".

The World Competitiveness Report suggests eight major factors which influence the competitiveness of companies and nations

1. Internationalization2. Domestic Economy3. The State (Government)4. Finance5. Infrastructure6. Management7. Science & Technology8. Quality of Labour Force

Page 4: How Do We  Remain  Competitive  in a  Globalised World?

Internationalization

Openness for international economic activities increases a country's economic performance.

Export-led competitiveness is often associated with growth-orientation in the domestic economy.

Higher integration with the international economy results in more productiveresource allocation and higher living standards.

Page 5: How Do We  Remain  Competitive  in a  Globalised World?

Domestic Economy

The more competition there is in the domestic economy the more productive and competitive the domestic firms are likely to beabroad and the higher value-added productivity and country prosperity.

Government

Direct state intervention in business activities are minimized. Government policies concentrate on creating a competitive environment for enterprises and on providing macro-economic and social conditions that are predictable and thus minimizing the external risks for economic activities.

It is flexible in adapting its economic policies to a changing international environment.

Page 6: How Do We  Remain  Competitive  in a  Globalised World?

FinanceA well-developed, internationally-integrated financial sector in a country supports its international competitiveness.

The efficiency of the financial sector is best measured by the narrowness of the "spread" between the rate of interest that borrowers pay, and the rate that depositors receive.

A narrower "spread" means either that depositors receive higher interest rates, or that borrowers pay less.

The financial sector performs more efficiently when the spread declines, whether it is borrowers or lenders who benefit

InfrastructureA well-developed infrastructure supports economic activity. It includes the availability of natural resources and functional business systems, information technology, transport, communication and education, and an efficient protection of the environment.

Page 7: How Do We  Remain  Competitive  in a  Globalised World?

Management

A competitive product and service reflects managerial ability, its long-term orientation, ability to adapt to changes in the competitive environment, a level of entrepreneurship and skill for integration and differentiation of business activities.

Science & TechnologyCompetitive advantage can be built on efficient and innovative application of existing technologies.

Investment in research and innovative activities creating new knowledge iscrucial for a country in a more mature stage of economic development.

Page 8: How Do We  Remain  Competitive  in a  Globalised World?

Quality of People

A skilled labour force with a positive attitude increases a country's productivity and competitiveness.

Education, the technical ability of labour, the quality of management and efficiency all contribute to competitiveness.

All this means that to pursue a competitive strategy many coordinated changes in human resource development are simultaneously neededrather than a few high profile initiatives in one or two areas.

(see: World Competitiveness Report )

Page 9: How Do We  Remain  Competitive  in a  Globalised World?

Measurement of Competitiveness

From an economic viewpoint, what we are essentially interested is the degree to whichfirms operating in a particular country have fundamentally different financial structures and performance compared to firms located internationally.

With respect to the view of competitiveness, if one were to invest or operate in a particular country, how would the firm’s asset structure likely to vary in comparison to a firm operating in some other country (say Asia) or average location in the world?.

In some countries in Europe firms typically hold more cash and other short term assets.

They do concentrate their assets in physical plant and equipment.

On the liability side, some firms operating in Europe have a higher percent of payables compared to other firms operating in say Asia,

Page 10: How Do We  Remain  Competitive  in a  Globalised World?

Advantages of a Globalize Trade

Enabled a number of international agreements to be reached by many countries.(e.g. developed and developing countries).

Created an environment for strategic alliances in commerce, trade, & investment

Impacted on the way Government operates to bring about internal changes

Many countries have raised their standard of living and economic efficiency

Given the opportunity for competitiveness

Page 11: How Do We  Remain  Competitive  in a  Globalised World?

Factors Influencing Competitiveness

Economic Strength & Power

Prices

Availability of Adequate Natural Resources

Information System Integration

Geographical Position With the Main Trading Partners

Business Culture

Socio-Economic Development

Size of Land

Human Resources Development

Financial Market Development

Page 12: How Do We  Remain  Competitive  in a  Globalised World?

Economic Strength & Power

Policy & decision makers should identify the weakest factors relating to economic performance and strengthen it as basis for increased economic development.

Complementary policies should be considered for spatial development rather than relying on one policy to enhance competitiveness.

Page 13: How Do We  Remain  Competitive  in a  Globalised World?

PricesIn spite of all identifiable factors to determine the competitiveness ofa particular country, the end result emerges from the set of prices ofthe commodities.

Prices can be determined through direct and indirect local costsinclusive of profit margin, then translated in the importing countriescurrencies.

Mass production of a certain commodity can have its effect on thefinal quoted price.

The only difficulty in maintaining a stable price is subject to changesin the exchange rate.

This is a macro-economic issue that can only be solved involvingthe Government and the private sector.

Page 14: How Do We  Remain  Competitive  in a  Globalised World?

Availability of Adequate Natural Resources

oIndicators at a European level has unveiled the deficiencies of presently available data banks.

oThe regional scale applied, which was based on administrative borders,o limits severely possibilities of adequately reflecting the state of nature.

The more the stock of natural resources a country possesses, the greater scope of mass production – thus resulting into economies of scale.

Then, the cheaper the price of the commodities available on the local or international commodities market.

Page 15: How Do We  Remain  Competitive  in a  Globalised World?

Information System Integration

The availability of reliable and accurate sources of information transcending national borders is a basic prerequisite for analysis of a country’s spatial integration.

The more processed information about a country’s economic development, the more potential for all the economic agents toorganize themselves and benefit.

This is one of the key information, which attract investors as part oftheir decision-making processes, of whether to invest or divest.

Competitiveness although it is difficult to measure and analyzed, itis all about the available information to decision-makers.

Page 16: How Do We  Remain  Competitive  in a  Globalised World?

Geographical Position With the Main Trading Partners

Accessibility is a main measure for geographical position since it describes the influence of all affecting factors considering their connections, volume and location.

If a country is out-of-reach from the main trading partners, the resultwould be that its exports become uncompetitive due to transport costs,which must be added to the factory prices.

Although plenty of accessibility studies have been made standardized data and operational specifications concerning calculation models are needed to enable researchers to calculate indicators in comparable way.

Page 17: How Do We  Remain  Competitive  in a  Globalised World?

Business Culture

Page 18: How Do We  Remain  Competitive  in a  Globalised World?

Socio-Economic DevelopmentTo what extent is the socio-economic development of a country importantIn terms of its competitiveness can be considered a subjective matter.

There is no study or commercial reports, which support this view withdata analysis, but on the contrary, to many analysts, if a country enduressocial stability, through a high standard of living, then the tendency is forthe population to adopt a production-driven culture.

A typical example, can be seen in the Asian countries, where the workersbelieve in a society of maximization of production.

In comparison with the European, the same input utilized may not necessarilyproduced the same output as the Asian countries.

For example, the European cannot compete in the car manufacturing businesswith the Asian.

Page 19: How Do We  Remain  Competitive  in a  Globalised World?

Size of Land Space

Most significant forms of land-use pressure is urbanization.

Urban sprawl has led to lower urban population densities, higher requirements for infrastructure, and the permanent conversion of land from other uses to built-up areas.

For the small state this is a major constraint in keeping with the paceof competitiveness.

There is always the demand to increase the productive land spacefor greater productivity.

However, the previous remark should be interpreted with much cautionbecause many African countries have adequate land space for production, but not used optimally.

Page 20: How Do We  Remain  Competitive  in a  Globalised World?

Human Resources Development

The human resources must be given the opportunity to develop theirKnowledge and skills to the highest standards possible.

Training must be a continuous process of the human skills development.

Ensure that the quality of life for all employees are met.

From previous research carried out in the UK, the scientists found thatthere is an increasing recognition that quality of life is not only the key goal of economic activity, but an important determinant of economic performance.

This is due that labour is one of the most critical ingredients in thefinished products or services.

Page 21: How Do We  Remain  Competitive  in a  Globalised World?

Financial Market Development

Page 22: How Do We  Remain  Competitive  in a  Globalised World?

Structureof

Competitiveness

Resources

Economic Innovation

Business Environment

Economic Results

•Human Resources•Finance•R & D•Technology

Commercial ExploitScience & TechnologyExchange of Know-How

Degree of CompetitionEconomic StabilityBusiness PerceptionsWorkers Attitude

Increase in ProductivityIncrease in GDPNew Employment

Page 23: How Do We  Remain  Competitive  in a  Globalised World?

Impact of Globalization on Small StatesSmall states face many challenges in the context of a global economy.

The principal economic constraint is the “size-effect”, which prevents the small statesto gain economies of scale in production.

This problem may not necessarily be representative of all small open economies because some of them are very competitive.

It is a reflection of the macro-economic policies of the Government of the day thatmakes the difference between competitiveness or lack of it.

Competitiveness depends on a coherent policy strategy to address the future development of a country in an integrated manner rather than in a piecemealstyle.

Page 24: How Do We  Remain  Competitive  in a  Globalised World?

Advantages of Globalization Trade on Small States

Scope of access to new markets for exports

New labour skills and specialists

New sources of funding for economic development

Access to advanced tele-communication system and information technology

Scope for economic diversification and national income growth

Dis-advantages of Globalization Trade on Small States

Difficulty to attract Foreign Direct Investment (FDI)Competition from low-cost producing countriesSevere competition for export in major markets

Page 25: How Do We  Remain  Competitive  in a  Globalised World?

Strategies To Remain Competitive in the Future

Maintain stable macro-economic policy

Maintain stable prices for the commodities and services

Seek for ways and means to become more innovative

Keep an openness to trade and foreign capital

Ensure that the human resources of the country are well equipped

Promote new ideas concept

Invite for strategic alliances, when deem necessary

Invest in more Research & Development Costs

Encourage the use of new technology

Ensure that the Labour Market is well protected

Page 26: How Do We  Remain  Competitive  in a  Globalised World?

I Wish You All

Good Luck

in Your Studies

Page 27: How Do We  Remain  Competitive  in a  Globalised World?