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What is the definition of global competitiveness according to the World Economic Forum?
Which country ranked first in the Global Competitiveness Report for the 2018-2019 period?
What is NOT one of the factors affecting global competitiveness?
How many pillars of global competitiveness are identified in the Global Competitiveness Report?
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Which of the following statements is true about the dimensions within the pillars of global competitiveness?
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What best describes the process of globalization?
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Which of the following is NOT a type of commodity observed in globalization?
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What role does innovation play in the pillars of global competitiveness?
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What does globalization of production primarily aim to achieve?
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Which of the following is a consequence of the falling barriers to trade?
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What is one key factor that influences the ability to build global companies?
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What was a significant change in the market scenario post-liberalization?
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Which political factor can significantly affect international business operations?
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Which economic indicator reflects the overall economic health of a country?
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Which factor is likely to create competitive advantages in global markets?
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What does liberalization of trade commonly lead to in an economy?
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What defines absolute advantage in international trade?
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Which of the following would contribute to a balance of payments surplus?
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Which best characterizes comparative advantage?
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What is NOT a factor in social and cultural differences that can affect international trade?
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How can currency conversion and shifts impact international trade?
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Which statement about political and legal differences in international trade is accurate?
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What is the primary objective of the Foreign Corrupt Practices Act?
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Which scenario might indicate a country's absolute advantage?
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Study Notes
Global Competitiveness
- Competitiveness is the ability of a nation to create and maintain an environment that supports value creation for businesses and prosperity for people.
- Global competitiveness is a country's ability to achieve sustainable high growth rates in GDP per capita.
- The Global Competitiveness Report (GCR) annually ranks the ability of countries to provide high levels of prosperity to their citizens. It measures institutions, policies, and factors determining levels of economic prosperity.
- Singapore, the United States, and Hong Kong were ranked the top three competitive economies in 2018-2019.
- India ranked 68th and China 28th in 2019.
Factors Affecting Global Competitiveness
- Physical Infrastructure
- Coordination among Public-Sector Agencies
- High Total Factor Productivity (TFP)
- Capacity Building for Small and Medium Enterprises (SMEs)
- Productivity Campaigns
- Intensified Research & Development (R&D) Activities
12 Pillars of Global Competitiveness
- These categories are not independent and are interconnected; for example, innovation is linked to education.
- The pillars are further divided into 133 dimensions, each assessed as a competitive advantage or disadvantage.
Globalization
- Globalization is the process of increasing interconnectedness in the world, making geographical, social, cultural, political, and economic interactions easier.
- Global markets are merging into one global marketplace.
- Globalization of production involves sourcing goods and services from different locations to leverage cost and quality differences in factors of production.
Elements of Globalization
- Globalization of Markets: Merging of national markets into one global marketplace.
- Globalization of Production: Sourcing goods and services from different locations to take advantage of cost and quality differences in factors of production.
- Falling Barriers to Trade and Investment: Reduction in barriers allowing firms to see the world as their market.
- Technological Innovation: Advancements in communication, information processing, and transportation technology, including the internet and World Wide Web.
Liberalization/Globalization: Critical Components
- Delicensing and Deregulation: Reducing restrictions on businesses.
- Liberalization of Trade: Reducing barriers to international trade.
- Reduction in Direct and Indirect Tariffs: Lowering taxes on imports and exports.
- PSU Disinvestment and Privatization: Transferring ownership of state-owned enterprises to private entities.
- Inflow of Foreign Direct Investment (FDI)/Foreign Institutional Investment (FII): Attracting capital from foreign investors.
Consequences of Liberalization/Globalization
- Integration of World Markets: Connecting different markets globally.
- Free Movement of Capital, Labor, Goods, and Services: Allowing resources to flow freely across borders.
- Promotion of Trade and Investment: Encouraging economic activity between countries.
- Reduced Entry and Trade Barriers: Making it easier for businesses to operate internationally.
- Vulnerability to Social, Political, and Economic Shocks: Increased interconnectedness can amplify the impact of global events.
- Aggravated Competition: Increased competition among businesses from different countries.
Factors Determining Building Global Companies
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Political Factors:
- Stability of Government: A stable political environment is crucial for businesses.
- Type of Government: Different government systems have different levels of influence on businesses.
- Control Structure: Centralized or decentralized government structures can impact business operations.
- Government Takeover of Assets: The risk of government seizing assets with or without permission.
- Operational Restrictions: Restrictions placed on business activities by the government.
- Remittance/Repatriation Restrictions: Restrictions on transferring profits and capital out of the country.
- Government Policies: Laws and regulations that impact businesses.
- Opposition Parties, Pressure Groups, and External Linkages: The influence of these groups on government policy.
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Economic Factors:
- Economic System: Open or mixed economies differ in their level of government intervention.
- Economic Development: The level of economic development in a country impacts its attractiveness for investment.
- Standard of Living: Per capita income reflects the purchasing power of individuals in a country.
- Sectorial Share in GDP: The contribution of different sectors to a country's GDP.
- Foreign Exchange Reserves: The amount of foreign currency held by a country.
- Economic Indicators: Key indicators like inflation rate and balance of payments.
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Technological Factors:
- Differentiation Strategy: Using technology to create unique products or services.
- Competitive Advantage: Using technology to gain an advantage over competitors.
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Legal Factors:
- Home Country Laws: Laws of the country where the company is headquartered.
- Host Country Laws: Laws of the country where the company operates.
- International Laws: International agreements, regulations, and conventions such as UN resolutions, patent and trademark protection laws, GATT, and codes of conduct.
Strategic Management: Relevance Pre-Liberalization vs. Post-Liberalization
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Pre-Liberalization Scenario:
- Protected Market: Limited competition due to government protection.
- High Restrictions: Strict regulations and barriers to entry.
- High Tariffs/Regulation: High taxes and restrictions on imports.
- Competition Limited: Few businesses competing in the market.
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Post-Liberalization Scenario:
- Liberalized Market: Reduced restrictions on businesses.
- Reduced Restrictions: Fewer government regulations on businesses.
- Reduced Tariffs: Lower taxes on imports.
- Low Entry Barriers: Easier for businesses to enter the market.
- Severe Competition: Increased number of businesses competing in the market.
3 Things to Remember for Post-Liberalization Strategy
- Strategies to Survive: Adapt to the more competitive environment.
- Strategies to Grow and Excel: Develop strategies to expand market share and profitability.
- Strategies to Sustain: Maintain a competitive edge and long-term success.
Absolute and Comparative Advantage
- Absolute Advantage: A country can maintain a monopoly or produce at a lower cost than any competitor.
- Comparative Advantage: A country can supply a product more efficiently and at a lower cost than other goods, compared with other countries.
Measuring Trade Between Nations
- Balance of Trade: The difference between a nation's imports and exports.
- Balance of Payments: Overall flow of money into or out of a country.
Effects of Trade
- Overseas Loans and Borrowing: Countries borrow money from other nations.
- International Investments and Profits: Countries invest in businesses and assets in other countries.
- Foreign Aid Payments: Countries provide financial assistance to other nations.
- Balance of Payments Surplus: More money flowing into a country than out.
- Balance of Payments Deficit: More money flowing out of a country than in.
Use of SDR (Special Drawing Right) from IMF
- The International Monetary Fund (IMF) uses SDRs for international financial transactions.
Barriers to International Trade
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Social and Cultural Differences:
- Language: Translation issues, culturally inappropriate messaging, and lack of understanding of local customs.
- Values and Religious Attitudes: Differences in business practices, employment, regional preferences, and religious holidays and practices.
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Economic Differences:
- Infrastructure: Basic communication, transportation, energy, and financial systems.
- Currency Conversion and Shifts: Fluctuating currency values can complicate pricing and affect market desirability and investment.
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Political and Legal Differences:
- Political Climate: Stability is a crucial factor for investment.
- Legal Environment: Differences in legal frameworks, international regulations, and corruption levels.
- Foreign Corrupt Practices Act: Forbids U.S. companies from bribing foreign officials.
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Description
This quiz explores the concept of global competitiveness, including its definition, key factors affecting it, and insights from the Global Competitiveness Report. Learn about the rankings of various countries and what contributes to a nation's ability to sustain economic growth.
