technology competitivness unit -ii
TRANSCRIPT
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DEFINITION AND INDICATORS OF COMPETITIVENESS
Competitiveness is the process by which oneentity is a person, a corporation, or a country, the global is to
win. Competition between business rivals within and outside
the boundaries of a country has intensified in recent times. To
be competitive, several factors must exist : ability, the desireto win, commitment or perseverance, and the availability of
certain resources. For a company, being competitive means
producing or providing, in timely and cost effective manner,
a product or service that meets the test of the market placeand the needs of customers. To maintain its competitive
position the company must continue to outperform its
business rivals. In todays global markets, those rivals maybe
operating within local, regional, national or global market
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At the Macro level the competitiveness of
national reflects the standard of living of their citizens.
National competitiveness is a consolidation of the micro level performance of companies and individuals the
true agents of economic growth. Issues of
competitiveness have gained prominence in the post
cold war era. The communism, the trend towarddemocracy, the opening of the market in the eastern bloc
and reduced military spending have created a new
environment for business. Countries objectives have
converged on creating sustainable economic growth
In 1985, the U.S. Presidents commission on
Industrial Competitiveness (Council on competitiveness,
1994) defined competitiveness as
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The degree to which a nation can, under free and
fair market conditions, produce goods and services that
will meet the test of international markets, whilesimultaneously maintaining or expanding the real income
of its citizens
The Washington based U.S Council on
Competitiveness adopted this definition and depicted the
determining factors of competitiveness as a four section
pyramid, shown in figure below.
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The Competitiveness Pyramid
InvestmentNo economy can operate successfully without
proper investment. The creation of wealth requires aproductive base as the foundation of economic growth.Investment s in technology, factories, equipment,
infrastructure and people help create such a foundation.
Investment in Productive Facilities
(Factories, R&D, Technology
Productivity(Quality should exist)
Trade
High
Standardof Living
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Productivity
The next step is improving productivity.
Productivity reflects the efficiency with which goods andservices are produced. High levels of productivity provide anorganization with a distinct advantage over its rivals.Productivity helps drive cost down and improve profitability.Efforts to improve productivity should not, however, sacrifice
quality. Gone is the time when quality was considered a luxury; today, it is a minimum requirement an essential factor.Product quality and performance are determinants of overallcompetitiveness.
Trade
Trade connects production with markets. Todays trade isglobal. Trade operations have become more complex with the
creation of trade blocs such as the European Union (EU)
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The North American Free Trade Agreement (NAFTA), The
Asian Pacific Economic Corporation (APEC), and the
Association of Southeastern Asian Nations known as theASEAN. Each bloc has been created with the objective of
fostering commercial activities within the blocs. These
commercial clusters, however do not operate completely
as closed entities ; they are still open to free trade tononbloc nations. This is why treaties such as the General
Agreement on Tariffs and Trade (GATT) and the World
Trade Organization (WTO) play key roles in modern world.
Suffice it to say that products or services that cannot betraded in open markets do not produce the economic
growth that can trigger a significant improvement in
standard of living.
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StandardofLiving
Gross Domestic Product (GDP) and Gross
National Product (GNP) are economic measures of theamount of wealth created in a country. This wealth is
passed to the citizens and reflected in their standard of
living . It is possible to determine a countrys
competitiveness on the basis of its citizens standard ofliving as defined by GDP per person. A nations
technological advancement is a major contributor to its
economic prowess. Technology also permits people to
accumulate wealth. EG ; In 1999 the net worth of a singleindividual Bill Gates, founder of Microsoft is estimated
to exceed $90 billion, More than the combined GDP of
several countries ; his wealth and power are a direct result
of Microsoft's dominance in Information technology.
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MANAGEMENT OF TECHNOLOGY AND GLOBALCOMPETITIVENESS.
Management of Technology plays amajor role in creating and maintaining competitiveness in theglobal arena. MOT activities maybe undertaken at the
national / international, or macro, level, or at the firm ormicro, level.
At the macro levelcountries must be able to :
Create an economic growth policy, taking into considerationthe fact that technology policy is a major contributor to
economic strength.
Provide an infrastructure permitting the support oftechnological enterprises and the facilitation of commerceand trade. Planning for HRD must also be an integral part of
any technology development strategy.
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Encourage cooperation between government, industry
and education and research institutions.
Energize and support technological innovation anddevelop plans to enhance creativity and support R&D
activity.
Promulgate necessary but unburdensome legislation
and regulation measures to protect the environment andstrengthen social structure.
In the past, national competitive advantage
focused on the availability and successful exploitation ofraw materials, labor, transportation and sources of
capital. This factors are still important today. However in
todays global economy, multinational corporations have
crossed national boundaries to establish their facilities
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Where production cost is lowest. This globalization of
production has erased most of the traditional bases upon
which the industrialized countries such as the UnitedKingdom, have built their competitive advantage.
Industrialized countries are now taking advantage of the
explosion of knowledge to create advanced technology
that will help them maintain a competitive edge. At thesame time however, improvements in communication and
transport technology have brought the world closer
together and facilitate the rapid migration of technology
across borders, thereby decreasing the widetechnological gap among countries. This changes world
conditions and the changing environment of business
make it evident that competitive advantage is increasingly
dependent on our talent and skill in managing technology
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and technological enterprises.
The National Academy of Engineerings
Committee on Engineering as an International Enterpriseconcluded that the comparative strength of a nationstechnical enterprise depends upon the following factors :
The strength of national research enterprise
The quality of technical education The presence of a large pool of technical talents.
The strength of information technology infrastructure
The ability to cultivate individual creativity and
initiative. Synergy between basic research and downstreamtechnical activities such as design and productioncapabilities.
The scale of domestic markets and the openness of
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Global markets as engines for innovation and its
commercialization.
The ability to continually modernize plant andequipment in private industry and the commitment to do
so.
Collaboration between industries and universities and
the government. National savings and the level of investment in
industrial modernization.
National policies supporting initiative to enhance
adoption, adaptation and diffusion of technology and
related know how.
Public support of generic and domestically developed
technologies.
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A COMPARISON OF INTERNATIONAL COMPETITIVENESS :
ECONOMIC INDICATORS
The economic performance of a nation is
commonly expressed in terms of its gross domestic
products. This index reflects the wealth created within
the borders of a nation and represents the output (totalmarket value) produced by people, firms and
governments domestically. Firms owned by other
countries and foreign citizens working within the country
contribute to this index. In 1993 the GDP of the UnitedStates was $6.5 Trillion. In 1998 it was more than $8.5
Trillion.
The GDP index is different from the GNP index,
which measures output produced by citizens of a country
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either within or outside of the borders of that country. Eg ;
For a country such as Japan, GNP includes profits made by
Japanese firms in the United States and for the UnitedStates, GNP includes profits made by U.S. companies
oversees and earnings of U.S citizens abroad but not
profits and earnings of Japanese Companies or citizens
located in the United States.The GDP index is becoming more commonly
used index because it correlates well with many other
economic indicators, such as industrial production and
employment. GDP can be adjusted for inflation toproduce another index, called real GDP. This is a good
index for tracing the actual increases or decreases in a
nations output after adjustments for inflation.
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THE U.S COUNCIL ON COMPETITIVENESS
In 1986, a group of chief executivesrepresents a large number of business leaders, and labor
organizations formed a council to conduct studies aimed at
improving U.S competitiveness in World markets. Known as
the Council on Competitiveness and located in Washington,D.C., it publishes an annual competitiveness index. The
publication assesses U.S economic performance relative to
that of a group of advanced industrialized nations known as
the GroupofSeven (G -7). The head of the G -7 nationsmeet annually to discuss economic issues affecting their
countries. The G 7 countries are the United States,
Canada, Japan, France, Germany, Italy, and the United
Kingdom ;
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In 1996, Russia joined the group.
1.Standardof Living Indexes
Standard of living is a reflection of how well people live in
a certain country or region of the world. It reflects the
distribution of a countrys wealth among its citizens. TheCouncil on Competitiveness defines standard of living as
gross domestic product per person. This index of standard
of living assumes that the countries wealth is distributed
evenly among inhabitants regardless of social or politicaldifferences.
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0
1020
30
40
50
6070
80
90
U.S Germany Japan France Italy Canada U.K
Column1
Long Term RealGrowth in Standardofliving (1973 1993)
The figure shows the growth in standard of living for
the G -7 countries between 1973 and 1993. As can be seen
in the figure healthy gains were achieved by
Japan, Germany, and Italy during the 20 year period.
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Of all the G 7 countries, the U.S had the lowest gain. Thistrend has been revising since 1992, with the U.S emergingas a better competitor. A more representative index for
the standard of living is Purchasing Power Parity (PPP).This index measure how much it cost to but a standardbasket of goods and services in a country relative to howmuch the same basket costs in the United States. It adjust
for current prices and exchange rates between countries.The basket of goods and services is selected on the basisof peoples purchasing patterns and is updatedperiodically to account for changes overtime.
2. Trade Indexes
The U.S trade balance in merchandise goods and servicesfrom 1984 to 1995. A trade balance represents the
difference between the total
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value of merchandise goods and services exported by a
country and the total value of merchandise goods and
services imported. The trade deficitis an index of therelative competitiveness of a countrys industry and
services organizations. The U.S moved from a positive
trade balance in the early 1980s to a serious trade deficit
in 1980s progressed. The negative trend continued in1990s reaching $210 million in 1997. A great contributor
to the U.S. deficit is the loss of a competitive edge to
countries such as Japan, Germany and the Asian Tiger
Nations. This is particularly true in the manufacturedgoods sector. In services sector, the United States has a
positive trade balance.
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3.Productivity Indexes.
Productivity , as defined earlier, is the ratio of output to
input. It reflects the efficiency of an operation. Severalindexes can be used to express and track productivity. The
most common index used to track productivity in
manufacturing is output per worker hour input, as
shown in figure below. The index commonly used to tracknational productivity as an indicator of national
competitiveness is based on GDP per total employed
persons.
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4. Investment Indexes
Investment in R&D, plant and equipment (P&E), and
education provides a base for long-term economicgrowth.. Therefore, it is very important to track these
indicators and to sound the alarm when they take a
wrong turn. Savings are another indicator, reflecting the
accumulation of resources necessary to unleashinvestment.
5.Patent Index.
Another index of competitiveness is the number of
patents granted per year, as patents reflects
innovativeness or a countrys ability to create technology.
In the United States, the share of patents granted to U.S
inventors declined in the 1970s and 1980s but began
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Increase in the early 1990s. The upswing indicates renewed
emphasis on creativity and on the importance of
technology in winning the global competition.