Global Competitiveness Report 2018-2019 PDF

Definitions The International Institute for Management Development defines competitiveness as "a field of economic knowledge which analyses the facts and policies that shaped the ability of a nation to create and maintain an environment that sustains more value creation for its enterpri...

Definitions The International Institute for Management Development defines competitiveness as "a field of economic knowledge which analyses the facts and policies that shaped the ability of a nation to create and maintain an environment that sustains more value creation for its enterprises and more prosperity for its people." The World Economic Forum defines global competitiveness as "the ability of a country to achieve sustained high rates of growth in gross domestic product (GDP) per capita." Global Competitiveness Report (GCR) Yearly report published by the World Economic Forum. The report "assesses the ability of countries to provide high levels of prosperity to their citizens". This in turn depends on how productively a country uses available resources. Therefore, the Global Competitiveness Index measures the set of institutions, policies, and factors that set the sustainable current and medium-term levels of economic prosperity. 2018–2019 report: Singapore ranks first followed by- United States and Hong Kong India ranks 68th in 2019 China ranks at 28th Factors Affecting Global Competitiveness Physical infrastructure Co-ordination among public-sector agencies. High total factor productivity (TFP) Improving the capacities of SMEs Productivity campaigns Intensifying R&D activities 12 pillars of Global Competitiveness  These components of the competitiveness survey are grouped in various categories to form the 12 pillars of competitiveness Pillars are not independent - e.g. innovation tied to education Each of the pillars consists of a number of different dimensions There are a total of 133 dimensions These dimensions are either considered to be a competitive advantage or a competitive disadvantage.  GLOBALIZATION Globalizationis the process which enables the geographical, social, cultural, political and economic movement internationally more easily. Globalization refers to growing economic interdependence among countries as reflected in increasing cross-border flows of three types of commodities: goods and services, capital, and know-how  ELEMENTS OF GLOBALIZATION Globalization of Markets: It refers to the merging of national markets into one huge global marketplace. Globalization of Production: It refers to the sourcing of goods and services from locations around the world to take advantage of national differences in the cost and quality of factors of production. Falling Barriers to Trade and Investment: The falling of barriers to international trade enables firms to view the world as their market. Technological Innovation: Technological changes have achieved advances in communication, information processing, and transportation technology, including the Internet and the World Wide Web. ▪ LIBERALISATION/ GLOBALIZATION: CRITICAL COMPONENTS  Delicensing And Deregulation  Liberalization Of Trade  Reduction In Direct And Indirect Tariffs  PSU Disinvestment And Privatization  Inflow of FDI/ FII Investments  THE CONSEQUENCES  Integration of World Markets  Free Movement Of Capital, Labour, Goods And Services  Promotion of Trade and Investments and reduced Entry And Trade barriers  Vulnerable To Social, Political, and Economic Shocks  Aggravate Competition 10 FACTORS DETERMINING IN BUILDING GLOBAL COMPANIES POLITICAL FACTORS  Stability of the government  Type of government - Democratic - Theocracy (religious) - monarchy  ( kingdom) Canada, USA ( decentralized Control structure province) Japan, France( centralized) POLITICAL FACTORS  Government take over of asset(with or without permission)  Operational restriction  Remittance/ Repatriation restrictions  Government policies  Opposition parties, pressure groups, external linkages Economic factors  Economic system ( open / mixed)  Economic development  Standard of living( per capita income)  Sectorial share in GDP  Foreign Exchange reserves  Economic indicators( inflation rate, BOP)  Technological factors Differentiation strategy Competitive advantage Legal factors  Home country laws  Host country laws  International lawsUN resolutions, Patents & Trademark protection & piracy laws, GATT, codes of conduct  STRATEGIC MANAGEMENT: RELEVANCE PRE LIBERALIZATION POST LIBERALIZATION SCENARIO SCENARIO  Protected Market  Liberalized Market  Reduced restrictions  High Restrictions  Reduced Tariffs  High Tariffs/ Regulation  Low Entry Barriers  Competition Limited  Severe Competition 3 Things to Remember: 1. Strategies to Survive 2. Strategies to Grow and Excel 3. Strategies to Sustain 16 Absolute and Comparative Advantage Absolute advantage Country can maintain a monopoly or produce at a lower cost than any competitor. Example: China’s domination of silk production for centuries. Rare these days, mostly tied to climate advantages for growing certain crops. Comparative advantage Country can supply a product more efficiently and at lower cost than it can supply other goods, compared with other countries. Example: India’s combination of a highly educated workforce and low wage scale. MEASURING TRADE BETWEEN NATIONS Balance of trade 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 International investments & profits from them Foreign aid payments Balance of payments surplus = more money into country than out Balance of payments deficit = more money out of country than in USE OF SDR (SPECIAL DRAWING RIGHT) FROM IMF BARRIERS TO INTERNATIONAL TRADE Social and Cultural Differences Language Potential problems include mistranslation, inappropriate messaging, lack of understanding of local customs and differences in taste. Values and Religious Attitudes Differing values about business efficiency, employment levels, importance of regional differences, and religious practices, holidays, and values about issues such as interest-bearing loans. Economic Differences Infrastructure Basic systems of communication, transportation, energy facilities, and financial systems. Currency Conversion and Shifts Fluctuating values can make pricing in local currencies difficult and affect decisions about market desirability and investment opportunities. Example: Devalued currency can make market less attractive for exports but more attractive for investments because payment in local currency is a relative bargain. Political and Legal Differences Political Climate Stability is a key consideration. Legal Environment Three dimensions: U.S. law, international regulations, laws of the countries where they plan to trade. Corruption can be an important issue. Foreign Corrupt Practices Act Forbids U.S. companies from bribing foreign officials, candidates, or government representatives. International Regulations Friendship, commerce, and navigation treaties between U.S. and other nations. Tariffs Taxes charged on imported goods. Enforcement problems, as with piracy.