Business Competitive Environment

1
Chapter 2

• Business Competitive Environment

2
ATP Assignments
Yamami, Kevin AMR Viveiros, David AMR Sun,
Mickey Cisco Barron, Eileen Cisco Mun,
John Dell Dobberteen, Brian Dell Canio,
Jonathan Dell Pirman, Trevor Dell Gao,
Yupeng Schwab Levine, Aaron Schwab Chua,
Gwen Visa Edquilang, Dave Visa Trent,
Raynette Visa Beall, Scott Visa Wong,
Eric Wal-Mart
3
ATP Team Meetings Next Week!
4
Anything significant going on in the business
world?
5
AOL-Time Warner Merger
Largest merger ever!? Entirely based on
stock. Media via the Internet. Will be
interesting to watch response from other media
companies like Disney. Also from Microsoft.
6
Wal-Mart Eyes Public Sales of Web Unit
Motivation to do so?
Joint venture with Accel Partners to gain web
experience. Palo Alto location as a way to
recruit web talent. Separate company will IPO to
raise funds and use stock for acquisitions. Separa
te company to avoid division of loyalties.
7
Introducing Raynette Trent
The resident expert on Chapter 2 in the textbook.
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Position Some Important Factors
1. The definition of competitiveness. 2. The key
elements of competitive advantage. 3. The role of
the nation relative to companies that compete
successfully on a global basis. 4. The role of
government within a nation. While contemplating
the idea that information technology might make
a difference.
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May you live in interesting times!
Confucius
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The future sure isnt what it used to be!
Pogo
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Competitiveness is the Pivotal Issue in the 21st
Century
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Business Environment
The global market will come to you, if you dont
go to it.
13
An Essential Roadmap
How nations, companies and individuals can and
must build wealth in a knowledge-based global
economy.
Breakthrough technologies in microelectronics,
biotechnology, new materials, telecommunications,
robotics, and computers have fundamentally
changed the game of creating wealth.
Relatively new industries are growing explosively
and existing industries are being transformed.
14
The US is Back!

• In the 1990s the US was the run away leading
  performer in the industrial world.

• The US claimed nine of the ten largest companies
  in the world in 1998 compared to only two in
  1990.

• Nine of the fifteen most profitable banks are in
  the US compared to none in 1990.

• The wealthiest man in the world is an American.

• American billionaires measure in the hundreds.

• US stock markets continue to set new records.

• Unemployment is at historical lows.

• Inflation is a non-issue.

15
Economic Success!
When it comes to playing in a knowledge-based
economy no one has done better than the US.
The US invented the game and determined the rules!
Knowledge is the new foundation for success and
the basis for wealth.
16
Some Important Questions

• Is the current, fairly unique US prosperity
  sustainable?

• Is global integration a boon or a threat to this
  prosperity?

• Will the forces that sparked the Asian meltdown
  provoke an
• era of stagnation or worse?

• Should global integration be slowed?

• What rules should be applied to the creation and
  protection
• of new ideas.

• How can nations create a social system in which
  entrepreneurial
• spirit can flourish without also creating
  income and wealth
• inequities that threaten the system?

• What skills are needed to succeed in this new
  economy?

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Some More Questions!
Are you personally ready?
Do you really understand the significance of what
is happening, the opportunities that it
represents and how to evaluate the implications?
18
Michael Porter Efforts/Contributions

• 1985 - Presidential Commission and
• Competitiveness Definition
• 1987 - Competitive Model and Value Chain
• 1990 - Competitiveness of Nations Study

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Presidential Commission Letter to President Reagan
Mr. President, it has been a great honor to serve
you and the Nation. The competitive challenge
calls for the leadership only you can provide.
We thank you for your vision, interest and
initiatives in making competitiveness a priority
on our national agenda.
John A. Young Chairman Presidents Commission on
Industrial Competitiveness
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Competitiveness Definition
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 while simultaneously maintaining or
expanding the real income of its citizens.
Source Presidents Commission on
Industrial Competitiveness
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Competitiveness A Link to National Goals
Stronger National Security
Decreased Budget Deficit
Human Resources
Trade Policy
Improved Domestic Performance
Increased World Market Competitiveness
More and Better Jobs
Capital
Increased Standard of Living
Reduced Trade Deficit
New Competition
Technology
Figure 2-1
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Presidential Commission
Recommendations 1. Create, apply and protect
technology. 2. Spur new industries and revive
old ones. 3. Pursue productivity gains
through technology. 4. Reduce the cost of
capital to American industry. Increase the
supply of capital available for investment,
reduce its cost and improve its ability to flow
freely to its most productive uses.
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Who is going to make it happen?
1. Government cannot legislate competitive
success.2. Government should highlight
the importance of competitiveness.3.
Everyone must recognize the competitive
challenge and its significance.
24
How Does a Company Compete?
If the bottom line to a business is profit, then
the top line is value to customer.
25
The Best Alternative Strategy?
To produce quality products and services through
effective leadership of skilled employees using
advanced methods through the innovative use of
technology.
26
A Good Competitor
1. Knows its products and services.2. Knows
its customers.3. Knows its competitors.
27
Competitiveness of Nations
The striking internationalization of competition
in the decades after World War II has been
accompanied by major shifts in the economic
fortunes of nations and their firms.
1. How did this happen?
2. What can one learn from this?
3. What can companies and countries do about it?
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Competitiveness of Nations
Why (how) are companies in a particular nation
able to gain a dominant competitive position in
a specific industry against the worlds best
competitors?
29
Competitiveness of Nations

• From what country is future competition likely to
  come from?
• What types of companies will be primary
  competitors?
• What will be their primary competitive strategies?

30
Organizations Compete Within Industries
What is the role of the nation?

• How Measure Success?
• Basis of Analysis?

31
Previous Basis of Competitive Analysis

• Porter Companies and Industries
• Economists Unit Cost of Labor Adjusted
• for Inflation
• Politicians Balance of Payment
• Companies The Right Strategies to
• Compete in Global Markets

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To Understand Competition

• The industry was the basic unit of
• analysis.
• Industries are organizations that
• directly compete with each other.
• Some industries are well-defined,
• while others are not.

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A Major Message
The role of the nation has increased as
competition has shifted more to the creation and
assimilation of knowledge.
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Competitiveness of Nations Study

• Denmark Copenhagen School of Economics
• Germany Deutsche Bank
• Italy Ambrosetti Group (transportation
  company)
• Japan MITI, Hitotsubashi University and
  Industrial Bank of Japan
• Korea Seoul National University
• Singapore Economic Development Board
• Sweden Institute of International Business,
  Stockholm School of Economics
• Switzerland University of Basel, University
  of St. Gallen, Union Bank of Switzerland
• United Kingdom The Economist
• United States Harvard Business School

35
Industry Case Studies
Denmark Agriculture Machinery Building
Maintenance Services Consultancy
Engineering Dairy Products Food
Additives Furniture Pharmaceuticals Specialty
Electronics Telecommunications Equipment Waste
Treatment Equipment Germany Automobiles Chem
icals Cutlery Eyeglass Frames Harvesting/Threshing
Combines Optical Instruments Packaging,
Bottling Equipment Pens and Pencils Printing
Presses
Rubber, Plastic Working Machinery X-ray
Equipment Italy Ceramic Tiles Dance Club
and Theater Equipment Domestic
Appliances Engineering/Construction Factory
Automation Equipment Footwear Packaging and
Filling Equipment Ski Boots Wool Fabrics
Japan Air Conditioning Machinery Home
Audio Equipment Car Audio Equipment Carbon
Fibers Continuous Synthetic Weaves Facsimile
Equipment Forklift Trucks Microwave and
Satellite Communications Equip. Musical
Instruments Optical Elements and
Instruments
Robotics Semiconductors Sewing Machines Shipbuildi
ng Tires for Trucks and Buses Trucks Typewrit
ers Videocassette Recorders Watches
Korea Apparel Automobiles Construction Footwear Pi
anos Semiconductors Shipbuilding Steel Travel
Goods Video and Audio Recording Tape Wigs
Singapore Airlines Apparel Beverages Ship
Repair Trading
Sweden Car Carriers Communication
Products Environment Control
Equipment Heavy Trucks Mining Equipment Newsprint
Refrigerated Shipping Rock Drills Semihard Wood
Flooring Teller-operated Cash
Dispensers Switzerland Banking Chocolate Con
fectionery Dyestuffs Fire Protection
Equipment Freight Forwarding Hearing Aids Heating
Controls Insurance Marine Engineers Paper Product
Mfg. Equipment Pharmaceuticals Surveying
Equipment
Textile Machinery Trading Watches United
States Advertising Agricultural
Chemicals Commercial Aircraft Commercial
Refrigeration and Air-Conditioning Computer
Software Construction Equipment Detergents Enginee
ring and Construction Motion
Pictures Patient Monitoring
Equipment Syringes Waste Management Services
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The ways that firms achieve and sustain
competitive advantage in global industries
provide the necessary foundation for
understanding the role of the home nation in the
process.
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Diamond of National Advantage
Firm Strategy, Structure and Rivalry
Chance
Factor Conditions
Demand Conditions
Related and Supporting Industries
Government
38
Competitive Success Is Not Determined By

• Natural Resources
• Labor Pool
• Interest Rates and Currency Value
• Economies of Scale

. . . Traditional Economic Thinking
39
Factor Conditions
The nations position in factors of
production that are prerequisites to compete in a
specific industry.

• Infrastructure
• People Skills and Training
• Factors Unique to a Specific Industry

A nation does not inherit but creates the most
important factors.
40
Factor Conditions

• Physical Resources
• Abundance, quality, accessibility and cost of
  land, water, minerals, timber, hydroelectric
  power, etc.
• Climatic conditions.
• Location and geographic size.
• Time zone re global communication.

41
Factor Conditions

• Infrastructure Type, quality, and user cost.
• Transportation
• Communication
• Mail/freight Delivery
• Health Care
• Schools
• Housing Stock

. . .Quality of life--to live and to work.
42
Factor Conditions
Capital Resources (Amount and cost of money)

• Secured Debt
• Unsecured Debt
• Equity and Venture Capital
• Savings Rate
• Tax Incentives
• Fiscal and Monetary Policies

43
Factor Conditions
Knowledge Resources Scientific, technical and
market knowledge that pertains to goods and
services.

• Universities
• Government Research Facilities
• Private Research Facilities
• Business and Scientific Literature
• Market Research Databases
• Trade Associations

44
Factor Conditions
Human, knowledge and capital factors are
mobile. Other elements of the diamond explain
international success.
45
Factor Conditions
The availability of factors is not enough to
explain competitive success.

46
Factor Conditions
Competitive advantage from factors depends on
how effectively and efficiently they are
mobilized by a company and deployed in the
economy.

47
Factor Conditions
The Japanese created and expanded needed factors
at a rate far exceeding that of all other nations.
48
Brazilian Chicken Industry

• Second largest chicken producer after the US.
• Two large poultry companies Perdigao and Sadia
• Has factor condition advantages
• A large domestic market that allows an efficient
  
• scale.
• Cheap, abundant corn and soya for feed.
• A large number of farmers to raise chickens.

49
Demand Conditions

• The sophistication of customer demand.
• The more demanding the local buyers the better to
  hone the global competitiveness of home-based
  companies..
• The local market provides an early picture of the
  emergence of buyer needs.
• This factor is a major positioner for success.

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Related and Supporting Industries

• Successful companies need suppliers who are
• 1. Home-based.
• 2. Competitive on an international level.

• A close relationship with suppliers contributes
  
• to innovation and upgrading of products.
• Prompts a range of interconnected suppliers
• that are all internationally competitive.

51
Firm Strategy, Structure and Rivalry
The way in which companies are created, managed
and choose to compete domestically is affected
by national circumstances.
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Firm Strategy, Structure and Rivalry

• Study Findings
• Company and individual goals vary.
• No one management style is universally
  appropriate.
• Differences in background of CEO and different
  company structures.
• Company structures are different.
• Contrasts in people motivation to work and learn.
• Career choices of the best students varies.

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Firm Strategy, Structure and Rivalry

• Germany
• The preeminent trading nation when considering
  the entire postwar period.
• They compete in highly sophisticated products and
  segments rather than high-volume ones.
• International success is built on many small and
  medium sized companies
• The breadth and success of German industries can
  only be understood in a historical
  context--achieved over decades
• Industry success includes a wide range of
  industries but Germany does not dominate them as
  does the U.S. or Japan.
• Have a very international orientation and export
  early.

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• The economy is extensively clustered.
• There is wide-spread private and state ownership.
• The structure of companies tends to be
  hierarchical and patriarchal.
• Pragmatism characterizes German management.
• Managers and workers are well trained in their
  industries.
• Discipline and order is evident in the way that
  companies are managed.
• Owners often have a deep involvement in all
  aspects of the business, especially in technical
  areas.
• They maintain an enduring relationship with
  employees.
• Particularly adept at complex production
  processes.
• Selling is technical versus advertising or
  intangible appeals.
• Complex product service requirements.

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• Customers tend to be conservative and cautious
  about new products.
• High levels of customer loyalty.
• Labor is very organized and is represented on
  company boards.
• New business formulation is weak.
• Most executives have technical or scientific
  backgrounds.
• Have a stubborn desire to achieve technical and
  quality excellence.
• Invariably compete on the basis of
  differentiation versus cost.
• Unrelated diversification is rare.
• Do not hesitate to invest abroad.
• Industry is prestigious and attracts outstanding
  people.
• The unique strength of the German economy is its
  capacity to upgrade its advantage by increasing
  the quality of human and technical resources.

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Germany Share of Total World Exports

• Bisquettes of Coal, Coke 70.4
• Potassium Sulfate 59.4
• Reciprocating Pumps 58.1
• High Pressure Steel Conduit 55.4
• Fresh Milk and Cream 54.5
• Rotary Printing Presses 51.1
• Iron, High Carbon Steel Coil 49.8
• Synthetic Luminophores 47.1
• Spinning, Reeling Machines 42.7
• Clothes Dryers 41.3
• Aircraft over 15,000 kg 38.1

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• Jukeboxes 36.5
• Polyvinyl Chloride Plates 35.9
• Rubber, Plastics Machines 35.5
• Combine Harvester-Threshers 35.3
• Packaging, Bottling Equip. 34.1
• Sewing Machine Needles 33.2

Seventeen industries where Germany has 33 or
more of the worlds export market.
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German Companies
BASF AG - Chemicals (1861) Bayer AG - Chemicals
(1863) Bayerische Motoren Werke AG - Autos,
Motorcycles (1913) Bertelsmann AG - Publishing
(1835) Daimler-Benz AG - Autos and Aerospace
(1882) Henkel KGaA - Detergents and Chemicals
(1876) Hoechst AG - Chemicals (1863) Friedrich
Krupp GmbH - Steel, Engineering, Trading
(1587) Mannesmann AG - Steel Tubes, Auto Parts,
Etc. (1885) Robert Bosch GmbH - Electronic Auto
Equipment (1886) Siemens AG - Electrical and
Electronics (1847) Volkswagen AG - Automobiles
(1937)
59
Firm Strategy, Structure and Rivalry

• Italy
• Joined the ranks of advanced nations in the past
  two decades.
• Overall growth in world export share is second
  only to Japan.
• Clearly contradicts its image as a country.
• Achieved advantage based on segmentation,
  differentiation and process innovation.
• Illustrates the power of a growing alignment
  between national circumstances and the shifting
  demands of modern global competition.
• Remains a study in contrasts--industry successes
  and failures.
• Successful industries are highly clustered
  including geography.

60

• The worlds leading exporter in textile/apparel,
  household goods and personal products and third
  in food and beverages.
• Companies tend to be medium to small that compete
  primarily through export with limited direct
  foreign investment.
• Large private firms tend to dominate the home
  market.
• Companies are often managed by a commanding
  leader involved in all activities.
• Below the leader is often fluid, relatively
  unstructured (chaotic?) operation involving an
  interpersonal competition that would be rare in
  Japan.
• Managers are resourceful improvisers and able to
  adjust to changes, to circumvent constraints and
  to adapt to new rules.
• Companies tend to be highly specialized and
  compete through constant model changes and
  innovation.

61

• Deal with customers on a family-like and personal
  basis.
• Combine product design with innovations in
  process technology.
• Are generally not successful where
  standardization, high-volume mass production, or
  heavy investments in fundamental research are
  involved.
• Most companies are privately owned and owners,
  managers and workers are closely attached to an
  industry.
• These factors lead to a long-term orientation and
  a commitment to sustained investment.
• Business is important and a magnet for talented
  individuals.
• Entreprenuership thrives in Italy--they are risk
  takers who are individualistic and desire
  independence.
• Benefited from a shift from standardized,
  mass-produced products toward more customized,
  higher-style, higher-quality goods. In many
  cases style was combined with investment with
  state-of-the-art production equipment.

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Italy Share of Total 1985 World Exports

• Meal and Pellets of Wheat 69.5
• Worked Building Stone 62.2
• Aperitifs
  58.1
• Glazed Ceramic Sets 56.6
• Precious Metal Jewelry 49.6
• Fresh Stone Fruit
  45.5
• Rubber and Plastic Footwear 41.9
• Fabrics of Combed Wool 41.8
• Domestic Washing Machines 38.2
• Steel High Pressure Conduits 35.9
• Sweaters of Synthetic Fibers 34.0
• Handbags
  33.7
• Woolen Sweaters
  33.1
• Leather Footwear
  32.8

Fourteen industries with one third of worlds
export market.
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Italy

• Fiat SpA - Autos and Farm Equipment (1899)
• Olivetti - computers and office equipment (1908)
• IRI Holding Co. (state owned) - 541 companies 5
  of GNP
• Ente Nazionale Idrocarburi - Petroleum
  Petrochemical (1953)
• Perelli SpA - Power Transmission, T/C Cables,
  Tires (1872)
• Benetton - clothes manufacturer (1955)
• Luxotica - frame manufacturers (NY Stock
  Exchange)
• Gewiss - electrical fittings
• Marposs - precision measuring equipment
• Safilo - frame manufacturers
• Persol - frame manufacturers
• Iris - ceramics

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Small Businesses in Italy
(Less than 100 employees)

• Exemplify flexibility and thrive in niche
  markets.
• Provide more than 2/3 of private-sector
  industrial employment.
• Escape many of Italys oppressive labor laws.
• Exports increased 20 during 1993s down economy.
• 99 of Italys businesses are owned by one or two
  families.
• To survive Asian competition they will have to
  concentrate on a higher level of specialization
  and devote more time to quality and innovation
  versus price.
• Many were founded following the end of WWII.

65
Olsa

• A Bertuzzi family-owned company with a head
  office in Milan and a factory in Bergamo.
• Produces plant and equipment for the chemical,
  pharmaceutical and cosmetics industries but
  thrives in niche markets.
• Niche products include a liquorice extractor and
  a special sterilization autoclave for
  candied-fruit that are made to order.
• Employ 80 people.
• 1994 Sales of 9.5 million with 70 from exports.
• Primary competitors are Swiss and German.

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Firm Strategy, Structure and Rivalry

• Japan
• Not far behind Germany in becoming a war economic
  power.
• Lacked Germanys historical position.
• Achieved competitive advantage in some industries
  and failed in others.
• The role of the government and management
  practices does not explain the success of
  Japanese industries.
• Has an extraordinarily high share of world
  exports in many industries with a complete
  absence of a natural resource intensive industry.
• There is a unique ability in Japan for the
  diamond to function as a system.

67

• Possesses a large pool of literate, educated and
  increasingly skilled human resources.
• Benefit from a large pool of trained engineers.
• Created and upgraded needed factors that far
  exceeded that of all other nations.
• Japanese companies are hierarchical and
  disciplined.
• Cooperation and subordination are the norm with a
  unique ability to coordinate across functions.
• Relationships between labor and management are
  respectful and strikes are rare.
• Many of the talented people flow to industry.
• A technical orientation is pervasive and many
  managers have engineering backgrounds.

68

• Strategies often follow a path of standardization
  and mass production with a major emphasis on
  quality.
• Ownership of companies is predominantly held in
  institutions and other companies.
• Japanese companies often define their goals in
  terms of volume and market share.
• Workers define their status on how well the
  company is doing.
• Continual learning is emphasized and accepted.
• Adopt an international outlook promoted by the
  amount of domestic rivalry which is the single
  biggest explanation for the success of Japanese
  industries.
• More willing to form new companies.
• Companies relentlessly upgrade their competitive
  advantage.

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Japan Share of 1985 World Exports

• Motorcycles 82.0
• TV Image and Sound Recorders 80.7
• Dictating Machines 71.7
• Calculating Machines 69.7
• Mounted Optical Elements 67.5
• Photo Thermocopy Apparatus 65.9
• Still Cameras and Flash Equip. 62.2
• Cash Registers and Accounting
• Machines 62.0
• Outboard Marine Piston Engines 61.0
• Electric Gramophones 59.0

70

• Microphones, Loudspeakers and Amplifiers 55.7
• Motorcycle Parts Accessories 53.4
• Track-Laying Tractors 51.8
• Pianos Musical Instruments 51.0

• Self-Propelled Dozers 50.6
• Color TV Receivers 49.5
• Portable Radio Receivers 48.4
• Other Radio Receivers 47.9
• Special-Purpose Vessels 46.8
• Electric Typewriters 45.0
• Steam Boiler Plants Parts 42.8
• Motor Vehicle Radio Receivers 42.5
• TV Picture Tubes 42.2

71

• Prepared Sound Recording Equipment. 41.5
• Photo Chemical Products 41.5
• Metalworking Lathes 39.7
• Coarse Ceramic Housewares 39.3
• New Bus or Truck Tires 39.1
• Buses 38.7
• Sewing Machines 38.7
• Iron, Steel Seamless Tubes 38.7

• Self-Propelled Shovels, Excavators 38.4
• Computer Peripheral Units 37.9
• Lorries and Trucks 37.5
• Other Electronic Tubes 36.5

72

• Metal Cutting Machine Tools 36.5
• Generating Sets with Piston Engine 36.1
• Other Cargo Vessels 35.7
• Iron, Simple Steel Rolled Plate 35.2
• Continuous Synthetic Weaves 34.7
• Clocks, Watch Movements 33.8
• Rolling Mill Parts and Rolls 33.4
• Liquid Dieletic Transformers 33.4

Forty-three industries with over one third of
the worlds export market share.
73
Japanese Companies

• Honda Motor - Autos and Motorcycles
• Sony Crop. - Consumer Electronics
• Bridgestone Corp. - Tires
• Matsushita Electric - Consumer Electronics
• Toyota Motor Corp. - Automobiles
• Nissan Motor Corp. - Automobiles
• Nomura Securities - Brokerage
• Hitachi - Computers and Electronics
• NEC - Computers and Electronics
• Fujitsu - Computers and Electronics
• Mitsui Group - Trading and Holding Co.
• Sumitomo Group - Trading and Holding Co.
• Mitshubishi Group - Trading and Holding Co.

74
What happened to Japan?
1. The second largest economy in the world.
2. Arrogance based on what they had accomplished
including an assumption that the only way
their economic endeavors go is up.
3. A rigidity in approach that takes too long in
a fast paced, global economy.
75
Competitiveness of Nations
It is helpful to ask what companies need to do
and where does government need to play a key
role?
76
Role of Government

• Serve as a challenger and catalyst to companies
  to
• compete successfully
• Focus on specialized factor creation.
• Avoid intervening in capital factor and currency
  markets.
• Enforce strict product, safety and environmental
  standards.
• Limit cooperation among industry rivals.
• Promote goals that lead to sustained investment.
• Deregulate competitors.
• Enforce domestic antitrust policies.
• Reject managed trade.

77
Singapore Model
Strong Government (The smartest and most capable
should govern) Long Term Planning Foreign
Investment Clean Administration Education for
All No Welfarism Family Values Law and
Order Communal Harmony
78
Singapore
An economic powerhouse. Three million people on a
small island. Passed the US in average income in
1999. Worlds best infrastructure!? Safe, clean
(smoggy). Interesting racial, religious and
language mix. Could go from great to awesome.
79
Companies gain an advantage against competitors
by responding to pressures and challenges.
80
The Company Agenda
1. Creating pressure within the company for
innovation. 2. Seeking out the best, most
successful competitors 3. View as a positive
factor the presence of domestic competition. 4.
Staying alert to customer, market and competitor
trends. 5. Emphasizing the home base as the
place to strengthen competitiveness. 6.
Selectively pursuing international advantage
opportunities. 7. As a company, playing a role
in strengthening the national competitive
diamond.
81
Conclusion

• Todays competitive realities demand leadership.
• Leaders believe in change.
• They energize their people to innovate
  continuously.
• They recognize the need for pressure and
  challenges to accomplish this.

82
Not Everyone Agrees
Kenichi Ohmae The Borderless World
The key global economic entity is the true
multinational company.
83
Ohmae Contentions
Four factors are usurping economic power once
held by nations 1. Capital. 2.
Corporations. 3. Consumers. 4.
Communication.
84
Putting Global Logic First
Although political leaders will
resist acknowledging the demise of the
nation- state, only those who can accept it
and promote region-states within and across their
borders will be able to provide the best quality
of life for their constituents.
Kenichi Ohmae
85
Wealth
2. Economic progress and wealth are direct
functions of capital investment in factories,
equipment, housing and infrastructure.
1. Growth is not the enemy of environmentalism.
It is necessary if the environment is to be
improved.
1. Natural and Environmental Resources
4. Knowledge generates the basic breakthroughs in
technology that create high economic growth rates.
3. Skilled people are needed to discover
knowledge, invent new products and processes and
to use the new products and processes.
2. Tools
3. Skills
4. Creating Knowledge
5. Entrepreneurship
6. Social Organization
5. Individuals who recognize that new things can
be done and who take the initiative to get them
done.
6. Ability to organize socially, maintain public
order, build or repair infrastructure, organize
and staff schools and deliver health care.
Lester Thurow
86
Global Competitive Trends
Global integration of both companies and
countries. Asian financial crisis. Reverberations
in Japan and China. European Union
enlargement. The US is the foundation of global
economic strength. An accelerating boom in global
information technology. Governance national and
international. Global growth?
87
Country Competitiveness
Openness Government Policies Finance Infrastructur
e Technology Management Labor Institutions
88
1998 Rankings
1. Singapore 2.16 2. Hong Kong 1.91 3.
US 1.41 4. UK 1.29 5. Canada 1.27 6.
Taiwan 1.19 7. Netherlands 1.13 8.
Switzerland 1.10 9. Norway 1.09 10.
Luxembourg 1.05
11. Ireland 1.05 12. Japan .97 13. New
Zealand .84 14. Australia .79 15.
Finland .70 16. Denmark .61 17.
Malaysia .59 18. Chile .57 19. Korea
.39 20. Austria .37
Source World Economic Forum
89
21. Thailand .27 22. France .25 23.
Sweden .25 24. Germany .15 25. Spain .02 26.
Portugal -.02 27. Belgium -.03 28.
China -.15 29. Israel -.17 30.
Iceland -.18 31. Indonesia -.19 32. Mexico -.23
33. Philippines -.31 34. Jordan -.42 35. Czech
Republic -.47 36. Argentina -.48 37.
Peru -.50 38. Egypt -.52 39. Vietnam -.53 40.
Turkey -.57 41. Italy -.69 42. South
Africa -.84 43. Hungary -.85 46. Brazil
-1.10
90
49. Poland -1.18 50. India -1.61 51.
Zimbabwe -1.70 52. Russia -2.02 53.
Ukraine -2.51
91
Conclusions
The diamond makes sense as a means of
understanding global economic success. Domestic
success does prepare companies to compete
globally. Major European and an increasing number
of Asian countries are capable of competing on a
global basis. The global marketplace is only
going to get tougher based on more, tougher
competitors. The diamond can help to anticipate
new competitors.