Unit 8
Competitiveness in Asia-Pacific
I.
Objectives
1.
Describe the concepts of
national and international competitiveness
2.
Differentiate between the
two leading assessments of international competitiveness and the factors that
determine relative ranking
3.
Differentiate between the
determinants of competitiveness at the national, sectoral and firm levels
4.
Explain the two leading
models of international competitiveness and identify their weaknesses
5.
Identify the key
determinants of competitiveness in leading Asia
Pacific economies
6.
Discuss emerging ideas on
economic clustering and competitiveness
7.
Explain the determinants of
the international competitiveness of Singapore and HK and how these
relate to the major conceptual models
II.
Introduction: The concept of competitiveness
(A) Applied to
national economies
1.
And now become the primary
economic goal for many governments
2.
Major focus of competitive
pressure between nations switched from ideological to economic competition
3.
In the uncertain world
government
a.
Unsure about what they can
achieve and how best to achieve it
b.
A few governments will commit
themselves to goals of full employment or to a more equal distribution of
income
c.
Commitment is to reliance on
market forces and the implementation of policies that facilitate ‘adaptability’ and free workings of market forces
(B) Meaningless word that applied to national economies and obsession
with competitiveness is both wrong and dangerous (Krugman 1994,44)
1.
This argument is based on
the belief that nations do not compete with each other the way companies do and
increase in productivity rather than international
competitiveness are critical for increasing the standard living of a nation
2.
Emphasis on international
competitiveness lead to governments pursuing inappropriate policies
3.
the external or trade sector
comprises only a minor part of the total economy
(C) Major weakness that limited quantitative impact of trade
performance for large economies
1.
Emphasizes the quantitative
impact of trade performance for large economies, such as US
2.
Equally important is the
qualitative effect
a.
the value and technological sophistication of products
traded
b.
In HK, absolutely fundamental
to productivity growth because overseas markets must be
penetrated to ensure optimal scale and cost competitiveness
c.
On the qualitative side, rate of company innovation clearly
affects trade opportunities and the potential return on exports
d.
Failure to innovate means that country relegated to exporting products that less technologically advanced and compromise its future
growth
e.
US superiority in software
f.
Improving the factors that affect international competitiveness encourage
productivity growth and international competitiveness
(D) The Relative
competitiveness of Europe, US and Japan
1.
Inappropriate policies
provide only temporary benefits to targeted or protected industries but slow
the growth of productivity and standards of living in the long run
a.
Asian from the banking, few industries in Europe that
withstand competition form the US
or Japan
b.
This is the case of steel, automobile, commercial aircraft,
airline and computer industries and many others
2.
Without the immense
financial subsidies or without repeated restructuring and trade protection
a.
Most European firms would be
unable to compete with US or Japanese firms
b.
Seven of top ten computer firms in Europe are American, one
is Japanese and only two are European
c.
Japan is the undisputed
leader and even US automakers are more efficient than Europeans
(E) Europe
able to keep wages and standards of living relatively high and rising during
the past two decades
1.
The rate of unemployment is
more than double the US rate and 3 times higher than the
unemployment rate in Japan
2.
The US has also been much more successful
than European countries in meeting the growing competition from NIEs
(F) The restructuring and downsizing that rapid technological change and
increasing international competition
1.
Resulted in average wages and
salaries not rising in real terms in the US during the past decade
2.
In Europe, real wages and salaries grew but very few new jobs were created and less able to compete in world markets than the US and Japan
3.
In Japan has protective and made
extensive use of industrial policies in the past, the result of Japanese firms have remained competitive while many European firms
have not
III.
Competitiveness
of nations and firms
(A)
National competitiveness
1.
Definition of national competitiveness
a.
‘The degree to which a
nation can, under free and fair market conditions, produce goods and services
that meet the test of international markets, while simultaneously maintaining
or expanding the real income of its citizens’ (Hart 1992)
b.
3 assumptions underpin this
definition:
(i)
Meeting the test of
international markets means the ability to design, to produce and to distribute
goods and services at costs that are globally competitive
(ii)
The question of whether
market conditions are fair or unfair
(iii)
International competitiveness
should not be achieved at the expense of the real income/wages of a nation’s
citizens
c.
Explained as being driven by
macro-economic factors and availability of cheap and
abundant labour, bountiful natural resources or government policy
2.
Assumption that increased national competitiveness in world market
a.
Having a beneficial effect on the national
economics
b.
Nations operate in the same
way as large corporations do when they compete in world markets
c.
Nations compete in international markets in the same way
that corporations do
d.
Paul Krugman argues strongly that Competitiveness
of a nations is not equivalent to that of a corporation
e.
If the corporation is not
competitive and therefore cannot afford to pay its workers, suppliers and bondholders, it will go out the business and cease to exist
f.
Or countries do not have a
well-defined bottom line and may be happy or unhappy with
their economic performance, they do not go out of business
g.
Completion between nation
states is not a zero-sum game. The countries compete on international markets not merely as rivals that gain at the expense of one another, and interdependent and main export markets or suppliers of imports
h.
The growth rate of living
standards essentially equals the growth rate of domestic productivity
3.
The fundamental problem lies
in applying to nations a concept
a.
Suited to explaining
competition between firms
b.
The application of traditional concepts of competitiveness
to the economic performance of a nation is
a dangerous error
c.
The constituent parts of a national economy that contribute to growth in productivity when looking at the
competitiveness of a nation
4.
Based on the performance of
companies within that nation
a.
Competitiveness does not
attach to the nation as a whole, but to its constituent parts
b.
Implicitly assumes that the competitiveness of nations is
not simply based on country-specific factors, heavily
influenced by firm-specific factors
c.
Influence competitiveness at the level of the firm on order
to understand national competitiveness
5.
Head-to-head competition
between nation states
a.
The position and performance
of the firm in the industry describe the state of advantage
b.
Positional superiority is a
result of relative superiority in the sources a firm deploys
c.
Including the firm’s sources
and strategies to gain sustainable competitive advantage
(B)
Firm competitiveness
1.
Defined by a business’s
sustainable growth rate relative to its actual or likely competitors
a.
Managers advantages through
a variety of lenses that can basically be divided into 3 broad categories:
(i)
Focus on the internal
capabilities and performance of their firm or whether they look outside to
assess its position
(1)
The inside-out perspectives
Internal core competencies that
lead to competitive success
(2)
The outside-in perspectives
Emphasizes key competitive factors
in he external environment
(ii)
Customers or competitors are
the more important feature of the market
(1)
Competitor-centred approach
Based on direct comparisons with
targeted rivals
(2)
Customer-oriented approach
Based on detailed analysis of
customer benefits in all targeted segments
(iii)
Competitive position of
individual firms separately and builds up a picture of individual sectors
(1)
The competitiveness of a firm
is assessed in relation to its profitability
(2)
Development of profitability
over time can be considered in distinguishing the internal and external
(3)
As a function of industry
conditions, bust also amount of value it creates relative to its competitors
(4)
Depend on the sources of
competitiveness relative to its competitors
2.
Competitiveness can be
defined as the ability of firms to generate
performance superiors to their competitors
a.
Firm outperforms its competitors
may enjoy a competitive advantage
b.
The notion of competitive
advantage refers to a significant edge over
the competition in dealing with competitive forces
3.
To gain long-tem success, a firms
are able to sustain competitive position
a.
Rivals may easily copy the sources of advantage
b.
Sustainable advantage implies the long-term nature
of compositeness
c.
The most advantages are transitory because
they can easily be duplicated
d.
When advantage persists
despite efforts by competitors or potential entrants to duplicate of neutralize
it
e.
Good example of EMI’s
experience in making scanners
(i)
Developed the CT scanner
released to welcoming and waiting market
(ii)
EMI’s mistake was not to
reinvest profits in the further development of skills and technology that led
to its success in the first place
(iii)
With short product life
cycle. Swift sequences of innovation and fast profit compression in which the
sources of competitive advantage are eroded at an increasingly rapid rate
(iv)
Hypercompetition
(1) Lies
not in trying to produce a single long-term advantage
(2)
Seeking to achieve a sequence
of temporary advantages
(3)
Keep the firm one step ahead
of the rest of the industry
4.
Changes in the ‘rules of the
game’ to which managers have been accustomed
a.
Dismantling of protection in
the US
domestic airline industry
b.
The established airlines were
long protected through their control of
hub-and-spoke networks and investment in computerized reservation systems
c.
Gained the loyalty of
frequent flyers who were locked into their reward programmes
d.
Built on at high cost, full
service airlines were vulnerable to low-cost, no frills, point-to-point
airlines such as Southwest Airlines that offered npn-stop flights on routes to
medium-sized and small cities
5.
Conclusion
a.
Dynamic phenomenon
Competitive advantage must be
nurtured and sustained
b.
Competitive advantage stems
from internal and external factors
Comprehensive explanation of competitiveness must incorporate both firm-level and
sectoral-level influences
c.
Created at any stage in the
value-added process
Advantages simply in manufacturing
and may be found in research and development or
marketing
d.
Concept of national
competitiveness is a nebulous
Country will be competitive in some
sectors, not in all sectors. The highlights the importance of economic clusters
that will be considered later in this unit
IV.
Determinants of competitiveness
(A)
OECD framework
1.
Encapsulate 3 broad sets of
influences:
a.
Factors internal to the firm
b.
Factors operating at the
industry or regional level
c.
Factors operating at an
economy-wide level- Macroeconomic settings and
institutional factors
2.
Factors identified by the
OECD as important aspects structural competitiveness are:
a.
Inter-firm technical
cooperation
b.
User-producer and
subcontracting relationships
c.
The level of tangible and
intangible investment
d.
The nature and quality if the
interfaces and support from public bodies and institutions in areas, such as infrastructure, the supply of trained personnel and R&D
3.
That model highlights the
complexity and levels of interaction in determining competitiveness in a modern
economy
a.
Defective in failing to explain
causal links and relationships
b.
Further refinement along
these lines has been undertaken in two complementary forums
c.
Michael Porter developed a
conceptually richer model of international competitiveness based upon the
experience of the major industrialized economies
d.
World Competitiveness Reports
ranking nations have been produced for a number of years
(i) Made in recent years to provide a conceptual framework
(B)
World competitiveness reports
1.
The World Economics Forum
and the International Institute for Management Development (IMD) provided
a.
Annual reports on the
relative ranking if national competitiveness
b.
A signal report produced
until 1995
c.
Competitiveness which defined
as ‘the ability of a country or a company to,
proportionally. Generate more wealth than its competitors in world markets’
d.
Some competitiveness does not
distinguish between revenues from:
(1)
The depletion of
non-renewable resources, such as oil
(2)
The exploitation of assets
accumulated by past generations, as is the case in most ‘old’ industrial
nations
(3)
True economic value added,
such as innovation, technology and transformation processes
e.
Examining a multiplicity of
quantitative and qualitative factors and obtaining the views of business people
about their own nation and other nations
2.
The greatest innovation in
executive survey
a.
This survey is distributed amongst the business community of each of the countries
ranked
b.
Takes into account the
opinion of the business people about the economic environment
c.
Business leaders take
subjective decisions reflects their perception of the business environment
d.
Extremely important in
determining the competitiveness of the country
3.
World competitiveness
indicates that real test of competitiveness takes place in international
markets
a.
Companies develop their competitiveness behind closed frontiers in a purely
domestic environment
b.
Economic theory holds that an
open international environment enhances competitiveness
c.
Nation is far better off when
following this path
4.
The Competitiveness Model
a.
National environment using
250 criteria grouped into 8 factors
b.
Used to build up the
Competitiveness Scoreboard are:
(I)
Domestic economic strength
-
Value added
-
Investments
-
Savings
-
Final consumption
-
Economic sectors performance
-
Cost of living
-
Forecasts
(II)
Internationalization
-
Current account balance
-
Exports of goods and services
-
Imports of goods and services
-
Exchange rate
-
Portfolio investments
-
National protectionism
-
Openness
(III)
Government
-
National debt
-
Government expenditures
-
Fiscal policies
-
State efficiency
-
State involvement
-
Justice and security
(IV)
Finance
-
Cost of capital
-
Availability of capital
-
Stock market dynamism
-
Banking sector efficiency
(V)
Infrastructure
-
Basic infrastructure
-
Technological infrastructure
-
Energy self-sufficiency
-
Environment
(VI)
Management
-
Productivity
-
Labour costs
-
Corporate performance
-
Management efficiency
(VII)
Science and technology
-
R&D expenditures
-
R&D personnel
-
Technology management
-
Scientific environment
-
Intellectual property
(VIII) People
-
Population characteristics
-
Labour force characteristics
-
Employment
-
Unemployment educational
structures
-
Quality of life
-
Attitudes and values
5.
The theory underlying
World Competitiveness model distinguishes between the competitiveness of companies and the
competitiveness of nations is at the core
a.
The main role of companies is
t create economic value added, which requires capital, technology,
labour and natural resources
b.
Companies do not operate in a
vacuum
c.
Performance depends heavily
on their national environment, which conductive to the development
of the competitiveness of companies
6.
The ability of a nation to
create an environment that favour sustained value added
creation
a.
Sustain is important as it
emphasizes the long-term dimension of competitiveness
b.
Reflected in education, value
system, or motivation of individuals who strongly influence the future
prosperity of a nation
c.
Impact on short-term performance
indicators hard to discern
7.
The World Competitiveness
Report
a.
Define its own economic and
social approach to managing competitiveness, however, regional and international agreements limit the margin of
manoeuvrability that nations have
b.
Economics policies and
business rules are being harmonized worldwide
with a strong emphasis on market economics
c.
From a social, nations
have preserved more sovereignty or independence
d.
A social consensus based
on their traditions, their degree of economic
development and their religious and political beliefs
e.
Society must be assess fundamental options, to take decision which are supported by
the populace and ultimately to reform itself
quickly in the same way that companies do
8.
4 key forces at work in the
competitiveness environment of any given country:
a.
Proximity and globality
(i)
Country is generally not
homogeneous
(ii)
Nations must deal with 2
types of co-existing economies:
(1) The economy of proximity comprises
traditional activities
- Social
and personal services, administrative activities and consumer-support activities
- Provided value and added close to
the end user
- Generally protectionist and
expensive
(2) The economy of globality comprises companies with international
operations
- Production
needs to necessarily be close to the end user
- Benefits
from the comparative advantages of markets worldwide
- Competitive
and price efficient
(iii)
The proportion between these
2 economies in national prosperity varies with the size and economic
development of a country
(iv)
Smaller countries are much
more dependent on their economy of globality
(v)
Encroaching on the economy of
proximity through measures, such as the removal of trade barriers, trade agreements, regional integration, privatization and deregulation
(vi)
Exercises strong pressure on
prices, margins and wages
b.
Attractiveness and
aggressiveness
(i)
Stand the test of
international markets, for example, Germany, Japan, Singapore,
Taiwan, Korea and HK
have been export-led successes
(ii)
Nations manage their
international process by being attractive, i.e., b creating a domestic environment that conducive to foreign direct
investments and trade
(iii)
Mange the
internationalization process by being aggressive, such as Korea and Japan
c.
Assets and processes
(i)
Nations manage their
competitive environment by relying more heavily on assets or on processes
(ii)
Some nations rich in assets,
such as land, people, natural resources
(iii)
Singapore,
HK and Japan
are poor in resources and relied essentially on transformation processes
(iv)
Inherited assets are not only
natural resources
(v)
Infrastructure, industrial
power and even education and skills are assets that accumulated by past
generations
(vi)
Assets can also generate
complacency in ‘old’ nations that confuse wealth and competitiveness
d.
Individual risk taking and
social cohesiveness
(i)
Shaping the competitive
environment of a country is the distinction between a system that promotes individual risk and preserve social cohesiveness
(ii)
Anglo-Saxon model is characterized by an
emphasis on risk, deregulation,
privatization and the responsibility of the individuals
(iii)
Through a minimalist approach
to a welfare system
(C)
Porter’s Diamond of competitive advantage
1.
Depends upon the development
and continuous renewal of competitive advantage
a.
Natural factor conditions
must be built around proprietary assets
b.
Innovation, branding and
product differentiation and superior management
2.
Competitive industries are
able to capture this process within a dynamic interaction of 4 key
determinants:
a.
Factors conditions
b.
Demand conditions
c.
Firm strategy, structure and
rivalry
d.
Related and supporting
industries
3.
The above model comprises 4
key elements:
a.
Factor conditions
The possession of sophisticated
factors (Infrastructure, efficient
communications and human capital investment) is
more important than simply possessing natural factor endowments
b.
Demand conditions
Industries benefit from the
existence of sophisticated and demanding customers who force
producers to upgrade to meet the most discerning demand
c.
Related and supporting
industries
The development of clusters of
related industries provide an important stimulus to innovation and upgrading
d.
Firm strategy, structure and
rivalry
(i)
Strong advocates of
unfettered competition and argues strongly against
allowing firms to attain strong market power
(ii)
High degree of rivalry is seen as conducive to upgrading and
to the maintenance of competitive advantage
4.
That model includes the role
of governments and chance factors
a.
The role of governments is an indirect one
b.
Policies should seek to
facilitate and support market forces and the upgrading of the factors of production
5.
In Porter’s model, nations are seen as attaining 4 stages of development on the basis
of their competitive diamonds
a.
Stage 1
(i)
Factor driven- Initial stage
(ii)
Economic driving force is
factor endowment
(iii)
Productions focuses on basic
commodities and unsophisticated products
(iv)
Nations experience difficulties breaking out of the stage
b.
Stage 2
(i)
Investment driven
(ii)
Enables the development of a
significant manufacturing sector that competes on the basis of scale and cost in price-sensitive simple products
(iii)
The commitment to saving
and longer term economic growth at the national level is shadowed by an increasing ability on the part of firms to absorb technology and
develop marketing skills
(iv)
Might apply to Malaysia at the
present time
c.
Stage 3
(i)
Innovation driven
(ii)
The mutually reinforcing
effects of the diamond allow the economy to break
away from dependence on foreign technology
(iii)
Marketing expertise and
develop an indigenous capability
(iv)
The virtuous cycle of
innovation-profit-investment-innovation is created
d.
Stage 4
(i)
Wealth driven
(ii)
The weakening of
incentives to sustain the investment for continuing innovation triggers a stage of economic malaise and eventual decline
(iii)
Wealth maintained and issues
of equity begin to take precedence over efficiency
(iv)
Resort to domestic consolidation
and vulnerable to foreign takeover
6.
Contribution of our
understanding of international competitiveness
a.
Attempt to capture and
subsume a range of partial explanations within more general model
b.
Dynamic in its orientation
c.
The primary implication that maintenance of competitive
advantages requires continual investment in
innovation and improvement
d.
Upgrading of the determinants
of competitive advantage, skilled labour as the source
of sophisticated assets
7.
Criticism that analysis
suffers from a far too strong inward orientation
a.
‘Claims’ to be a model
of international competitiveness, the determinants of such competitiveness are
all domestically based
b.
Scant regard to changing
trade and investment patterns, to the decision of supra-national
organizations, such as WTO
c.
Emerging regional economic
groupings or overseas market-servicing modes other than exporting
d.
Strong inward focus is also
apparent within the determinants that rivalry and competition is almost exclusively domestic
e.
Difficult to attain within
small economies
8.
Inward investment is not
entirely healthy
a.
This weakness through an
analysis of the impact of globalization on the
competitiveness of individual nations
b.
Multinational business
increasing attractiveness for domestically based firms to
exploit the created competitive assets that they posses in foreign
locations
c.
The smaller open economies
created the possibility of a ‘double diamond’ paradigm
d.
The individual firms increasingly rely upon sales in
overseas markets, the expense of a relative decline
in the importance of their home markets
e.
The international networks of
subcontracting, strategic alliances, other collaborative relationships expand, the locational specificity of the determinants of their international
competitiveness becomes blurred
9.
Applicability of the Porter
model to a smaller or resource-based economy
a.
Developed inductively from
studies undertaken within 10 major industrialized nations
b.
Manufacturing industries producing innovative high-technology products
c.
Not representative of the
industry structures of the majority of economics in the world
d.
Require modification when applied to
smaller nations or to those with a marked dependence on agriculture, services
or natural resources
V.
Clustering and competitiveness
(A)
Clustering
1.
In groups or clusters
a.
Made explicit in Porter’s
model in the concept of Related and Supporting Industries
b.
Geographically bounded
concentration of similar, related or complementary businesses
(i)
Business transactions,
communications and dialogue
(ii)
Share specialized
infrastructure, labour markets and services and that are faced with common opportunities and threats
2.
Increasing interest in business clusters
a.
Economic significance and
advantages they offer to smaller and medium-sized firms
b.
Interest stems from the significance of clusters as driving forces in international trade, as a home base for leading-edge customers and international competitors
c.
Innovative sourcing locations
for machinery and technology
d.
Provides a framework for
local economic development and local export growth
3.
The importance of clusters and their impact on spatial economies is
clearly illustrated in the case of US manufacturing
a.
Great concentration of industrial strength in the US was concentrated in a relatively small part
of the North East and the Eastern part of the American Midwest
b.
Evolved in the second half of the 19th century and proved
remarkably persistent
4.
Traditional industrial belt
is being displaced these days by a series of new high-tech clusters
a.
Today’s US high technology employment is located outside
the old manufacturing belt
b.
The clusters is their dependence
on knowledge as the key resource
c.
Research laboratories of
universities provide a source of innovation-generating knowledge that private enterprise for commercial exploitation
d.
R&D spillovers are
facilitated by the geographic proximity of university research and industrial
activity within regions
5.
Research universities contributes
to increasing returns
a.
Product as computers, pharmaceuticals, aircraft,
software or fiber optics are complicated to design and manufacture
b.
Require large investments in
R&D but continue fall and profit increase, unit costs continue to fall and
profit increase
c.
Make products incorporating
similar or related goods
d.
Technology-intensive firms
are interested in cluster building
e.
Increased returns from R&D spillovers will lead to divergent development between cities, regions and nations
(B)
Common elements of successful clusters
1.
Common elements of successful clusters
a.
Cluster core
(i)
Critical mass of similar and
related firms in close geographic proximity and highly specialized
(ii)
Strong competition and strong
cooperation among firms in the cluster
(iii)
Firm retains the flexibility
inherent in small, often in owner-managed businesses, economies of scale and vertical
integration are achieved through networks
(iv)
Buyers and their nearby
suppliers facilitate rapid responses to changing markets and evolving
technologies
(v)
Widespread availability of
information and knowledge, higher rate of new business formation
characterizes successful clusters
(vi)
Clusters have more both of
expensive local links for business and expense international links
b.
Specialist supporting firms
(i)
At the core of a typical cluster
is an array of very specialized businesses
(ii)
Included service providers
such as financial, legal, design firms, raw
material and component suppliers, equipment manufacturers and servicing firms
(iii)
Supporting firms tend to be
very specialized
(iv)
Venture capitalists in
Silicon Valley and lawyers in Hollywood
are all very specific
(v)
Rivalry and cooperation
amongst these firms and tight links exist between them and
those at the core of the cluster
c.
Supporting social
infrastructure
(i)
The ring includes secondary and tertiary educational institutions, industry training
organizations, local sources of business and technology advice, and
professional/trade associations
(ii)
The
performance of a cluster is the capabilities
of the separate elements of this social infrastructure and the linkages between
them, be they public or private elements
(iii)
Array of organizations tends
to be specialized industry specific, provided
opportunities for the local cluster participants to meet formally and
informally
(iv)
Trust is developed through frequent association, common opportunities are identified, and participating between education providers
(v)
Firms ensure that the local workforce is both skilled and well informed about the
industry
(vi)
Local civic leaders
representing the interests of the whole community play a key role in building these vital local linkages
d.
Supporting physical
infrastructure
(i)
The physical infrastructure
of a high performing cluster is highly specialized and closely integrated into other elements of the cluster
(ii)
Ability to identify and deal
speedily with capacity constraints
2.
Contain 4 separate but tightly
integrated elements that ensure close alignment
a.
Building this alignment is
the agreed visions for the cluster developed by either a formal and informal
local leadership team
b.
Silicon
Valley with a vision to build a
community collaborating to compete globally through their joint venture
c.
The high level team needs to have the collective ability to identify gaps in the local system and take action to bridge such a gaps effectively
d.
As local leadership team is a major stimulus in facilitating appropriate conditions for a cluster
take-off
3.
Social
values between the participants in a well-performing cluster foster trust and
encourage reciprocity
a.
Individual
firms and organizations recognize specialized ‘ecosystem’ and understand the
fine balance between rivalry and cooperation
b.
High
performance cluster attract specialized support services, draw in skilled staff from further
afield and capture the attention of oversea investors
c.
Attracting customers firm far
beyond the geographic periphery of the cluster and especially on oversea
customers
d.
High performance clusters comprise
more than a collection of local island of excellence
e.
Integration of the separate
elements that leads to a local economy of excellence
(C)
Stimulating local clusters
1.
2 key elements in enhancing
the wealth-creating capability of local community:
a.
Building of trust between all
local elements
b.
Development of the
community’s specialized core competencies
2.
Clusters develop through natural market forces
a.
Build on and enhance even an
embryonic cluster by locking in early advantages
3.
3 broad generic strategies
in stimulating local clusters:
a.
Improving local linkages,
building trust
(i)
Generating informal and
informal opportunities for the cluster participants to meet, discuss and learn
form each other
(ii)
The development of hard
business networks between cluster participants, enabling
individual companies to undertake activities
(iii)
The provision of technology
support
(iv)
Facilitating inter-company
benchmarking
(v)
The development of learning
circles between cluster participants
b.
Building local competencies
(i)
The development of industry
specific training through partnerships between businesses and education
providers
(ii)
The enhancement of
school-industry links
(iii)
Attracting immigrants with
particular skills
c.
Extending the reach of the
cluster
(i)
Generic promotion
(ii)
Participants by cluster
participants in mini-missions to overseas markets, trade fairs
(iii)
Attracting cross-border
investment, particular investment brings
contact/access to oversea markets and bridges capability gaps in the cluster
(iv)
Upgrading local transport
facilities, reducing inter-model costs and development of direct links with
overseas markets
VI.
Competitiveness
in the Asia-Pacific region
(A) The region
1.
Highlights a number of
important insights into the idea of international competivieness
a.
Diversity in terms of
international competitiveness and includes some of the most
competitive aw well as the least competitive economies in the world
b.
Does not appear to be any simple
explanation of competitiveness
No clear relationship between size
and competitiveness, cost and competitiveness or resource availability and competitiveness
c.
Economics are rarely strong
across all measures
HK
achieved through its openness, government and infrastructure, does not rate as well in the areas of technology and management
2.
Thailand get a clearer insight into comparative strengths and weakness
a.
Economic growth is driven by
exports
(i)
Must compete with its Asian
neighbors as well as with emerging Latin American markets for a share of
international trade
(ii)
Lost some of its competitive
edge compared to lower-cost production locations in China,
India, Indonesia
(iii)
Pressure on Thailand to
shift towards higher value-added markets
b.
Suffering from an overly
strong currency and overly ambitious bank lending
Tightened
monetary and fiscal policies, restructured and streamlined
financial institutions, cut budgets for non-essential
infrastructure projects, taking steps to increase
domestic savings rates and curb the current account
deficit
c.
Policy implications increase
competitiveness
(i)
Restore a stable macroeconomic
environment
(ii)
Supports business activities
(iii)
Take immediate measures to
support
(iv)
Medium-term development of
manpower
(v)
Information technology
(vi)
Science and technology
infrastructure
(vii)
Basic infrastructure
d.
Trade restrictions and the
policy of exchange rate management
(i)
External side of the economy
was not subject to appropriate adjustment
(ii)
Questions over the level and
competence of government intervention were also apparent
(iii)
Competition and efficiency with the Financial sector became increasingly apparent
(iv)
Thailand support to the criticisms of a lack of transparency and claims of
‘crony capitalism’
(v)
Competitiveness rankings are
at best indicative and should not be taken as robust short-term forecasts of
likely performance
(B)
The competitiveness of Singapore
1.
The city-economy upgraded
its sources of competitive advantage over a 35-year period
a.
Strong government
intervention, a national and heavy dependence on inward investment have guided
development
2.
The development of the Singapore
economy encompassed a number of distant stages:
a.
First stage (In 1959 through
to the mid-1960s)
(i)
Commitment to
industrialization through import substitution
(ii)
This strategic thrust was designed to overcome difficulties inherited with independence
(iii)
Capitalize on a proposed
common market with Malaysia
(iv)
Encourage growth, increase
the employment of labour and provide an alternative to traditional entrepot
trade
b.
Second stage (Ended in the
mid-1960s)
(i)
Separation from Malaysia and
the withdrawal of the British from their military base
(ii)
The export of
labour-intensive products
(iii)
Active government
intervention in the economy, prompted by Relying
on market forces to bring about a transformation of indigenous commercial
entrepreneurs would be too slow and uncertain
(iv)
Government sought to create
an investment climate and business environment attractive to international
business
(v)
Strong political, economic
and social measures as well as the reform of institutions, a restructuring of education and an overhaul of tax structures
(vi)
Rapid growth in trade and
investment and the move by MNES to shift labour-intensive
production processes to lower labour-cost locations
c.
Third Stage (Early 1970s)
(i)
Labour shortages and a fear of rising overseas protectionism encouraged a shift towards higher value-added
activities
(ii)
Introduction of a range of
fiscal measures and increased commitments to
R&D and to education that create a sophisticated
manufacturing and service-based economy
(iii)
Building upon its superb location, infrastructure and highly-skilled
labour force, the country seeking to position at the
centre of regional competitive strategies in attempt to attract higher order business functions
(iv)
Including R&D, marketing,
finance and planning
(v)
Strong business links with HK and seeks to provide an attractive base for conducting business with
the important future markets of China and Vietnam
3.
Active government
intervention and commitment to upgrading the sources of advantage
a.
Reflected in high rates of
growth
b.
Full employment
c.
Dramatically increasing
standard of living
(C)
Competitiveness of Hong Kong
1.
The models are often applied
to those nations that have difficulties competing successfully
a.
Regularly ranks high in the
competitiveness rankings
b.
Subject to detailed analysis
2.
HK economy at 3 levels:
a.
Overall economic performance
b.
An analysis of key issue
facing HK business
c.
Detailed analysis of the
competitiveness of nine selected HK industries
3.
Building on location ,
population and economic system
a.
Region and reunification with
mainland China
b.
The transfer of lower
value-added manufacturing activity to China
4.
Growing globalization of
business and the increasing importance of the Asia-Pacific region within the
world economy
a.
Substantial trading economy
and the top ten largest traders in the world and major exporter of commercial services
b.
Being the top fie sources of
foreign direct investment and major investor in mainland
China
c.
Underpinned by highly
international firms in industries, such as garments, travel goods, toys and business services
d.
Geographic diversification is a potential source
of competitive advantage yielding opportunities in flexible sourcing and integration of regional business systems
5.
Analysis of the
international competitiveness of HK highlights
a.
Not simply the assets
or resources that an economy possesses
b.
Needs to consider the way these are combined and utilized
c.
Unique combinations that contribute to a broadly supportive business environment and vibrant
economy
d.
Including the balance between business and
government, between local and overseas firms and between entrepreneurship and management
6.
The role of government plays limited role in the
commercial sector
a.
It does not attempt a strategy of picking
and supporting winners and undertakes little in the way of planning
b.
Legacy of British colonialism
and the disdain of colonial administrators for commerce
c.
The result is the most efficient
way of organizing a modern economy
d.
Active government intervention in HK tends to be restricted to areas of social policy, including education, property, housing and medical services
e.
The system ensures a separation of interest interaction and communicate between the two groups, which operates to the mutual benefit of all concerned
7.
Combination with regard to
local and overseas firms
a.
HK are based businesses in a number of industries,
particularly within construction and banking, with major
oversea-based competitors
b.
Recall from Porter’s model that competitive pressure is seen as a major determinant of a nation’s
international competitiveness
8.
Transnational skills enabled
the territory has enabled the territory to play a critical role in the regional
economy as an integrator skills and assets
a.
30% HK exports of
manufacturers and traders are sourced outside HK and mainland China
b.
extends into the service sector, particularly into financial and business services
c.
HK’s role as a foreign investor is also considerable in directing
investment into mainland China
d.
Various roles are articulated through the overseas Chinese
for whom HK is the centre of their regional
operations
e.
Emergence of HK at the centre
of many of the complex regional deals and increasingly significant linkages between overseas Chinese and
mainland Chinese companies
9.
The primary sources of HK’s
advantage
a.
Location at the centre of a
highly dynamic region, competitive infrastructure and
financial markets and range of highly successful
clusters
b.
HK’s location has long been a source of competitive advantage and
continues to provide benefits in accessing some
of the world’s largest and rapidly developing markets
c.
The natural advantages of
deepwater port facilitate the trade ad trade-related services facets of the
economy
d.
Enhanced through
infrastructure investments that created a world class seaport, airport, telecommunications industry. And possesses sophisticated financial and capital markets
10.
Tend to display strong
clustering characteristics
a.
Are included property, infrastructure and development, financial and business services, transport
and logistics, light manufacturing and trading and the tourism cluster
b.
HK traders are benefit form the capability of the transportation and logistics sector, financial and business
services and the light manufacturing
cluster
11.
HK enjoys many competitive advantages, does face a number of challenges
a.
High and rising costs, staff training and development issues, technology development, the
ability to provide an environment attractive to overseas firms and employees and challenge of new competitors within the region
b.
HK is pressure of high and
rising costs
c.
Residential and office costs
in HK are highest in the world and has not been helped
by comparatively high rates of inflation, average just under 10% in the
early 1990s
d.
Productivity growth kept pace
with wage increase, tending to force up process or
squeeze margins
e.
Need to contain future cost
increase so that they are at least in line with those of competitor
nations
12.
Created new demands for
skilled workers, education and training system as well as immigration policies
a.
Staff shortage have high
staff turnover rates, particularly among younger workers
b.
Attempts to forecast
manpower requirements need to be tailored to
education provisions in academic and vocational training
c.
The tertiary institutions are not sufficiently responsive to emerging-market needs and satisfactory performance require a greater input from the private
sector
d.
Mainland China’s
companies will increase the demand for the more highly skilled workers and
attract talent from HK
e.
Skilled staff that companies will increasingly
look to immigration policies
f.
HK also deal with the less-skilled people
who find it increasingly difficult to obtain employment
g.
Light manufacturing jobs that they traditionally sought has fallen from 42% of employment in 1980 to just 16% in 1995
13.
Relocating activities to
lower cost source has allowed HK firms to postpone
the inevitable upgrading if economic activity
a.
Production processes moved to
mainland have operated in basically the same
way
b.
Management and labour
practices have not really changed
c.
HK firms have been criticized for insufficient investment in competitive assets, particular in training, information systems and R&D
14.
Long term HK must be able to maintain
some of the unique combinations
a.
Ability to attract foreign
investment
b.
Strong growth and positive
prospects within the region
c.
City faces increasing
competition
d.
Major business centers within
the Asia-Pacific region, most notably HK, Tokyo and
Singapore
e.
Singapore represents a direct
threat to HK in terms of attracting regional
headquarters and offices of multinational
enterprises in certain financial service, in communications and the convention business
(D)
Competitiveness in the computer industry
1.
Develop a fuller
understanding of the dynamics if competitive advantage by looking at an
industrial sector
a.
Dominated throughout its
history by US companies that developed most of the important innovations, set key technical standards and control over two-thirds of the world’s market for hardware,
software and services
b.
Periodic technology changed
the structure of the industry
2.
The personal computer
revolution of the 1980s led to new phenomenon in the industry
a.
The actual production of
computer equipment shifted mostly to Asia, away from the US
b.
Using Asian countries as low
cost production platforms and suppliers as they created global production systems in the PC industry and transferred technology and capabilities to Asian firms
c.
The lower costs and technical
capabilities of Asian firms enabled them to take
on logistics, manufacturing and distribution of PC components for US multinationals
3.
In 1990s some Asian firms had developed
their own branded computers and peripherals that they aggressively marketed to global and domestic markets
a.
Asia’s computer companies are engaged
n fierce competition with one another over production of commodity hardware that are low margin, decreasing returns businesses
b.
US dominates the high margin, increasing returns businesses
in microprocessors, software and services
c.
Asian companies are partners
who supply components to US PC companies and customers who buy US chips, software and integration services
4.
Competitive advantages by focusing their efforts and finding niches in the global computer production system established
by US multinational enterprises
5.
Diversified portfolios of companies constituting industry clusters able to adapt to changing global market conditions
a.
These countries provided incentives to attract
foreign investment, promoted participant by
domestic companies in global industry, support computer production
b.
The capabilities critical to companies to
companies were cost and cycle-time reduction, strong engineering skills and close linkages to the global production system
c.
Included skilled engineers, computer
professionals and other human resources, excellent
infrastructure and strong technological
capabilities
d.
The particular character of
the computer industry in each country was strongly shaped by domestic industry structure, industrial policy ,interaction with global
markets and multinational production
networks
6.
The competitive strengths of
Japanese and Korean firms are higher volume manufacturing
a.
Strong positions in commodity
products
b.
The strengths of Taiwan, Singapore and HK are in speed, flexibility and strong ties with US companies that made leaders in products with short product cycles
c.
Asian companies are insignificant in software and services
outside their own markets
7.
Asia’s companies are increasingly engaged in intensive competition
with one another throughout the hardware industry
a.
Japanese companies face
fierce competition from Korea and Taiwan
b.
Singapore excess capacity and resultant price competition are squeezing
profit margins
8.
US competitors enjoy a
number of strengths
a.
Miscoft and Intel have virtual monopolies in the key operating system and microprocessor markets, which enables them to earn huge profit margins
b.
US companies are also leaders
marked by short product cycles and rapid technological change
9.
US competitive advantage are continued control over the architectural standards that define the
industry
a.
The dynamism of the American market and the extraordinary entrepreneurial
capabilities of the US
industry
b.
Has created a shortage of computer
professionals that threatens future growth
c.
Asia’s computer industry companies launched a renewed attack on the US computer
industry and markets beginning in 1996
10.
Asia offers a number of opportunities
a.
Asian countries will provide
a large, rapidly growing market for US-made systems, software,
services and entertainment content
b.
Continued to be production base and reliable, Cost efficient supplier of parts, components, peripherals and OEM system
c.
R&D, design, distribution and marketing will continued
to be done by US firms while their Asian partners provide engineering,
manufacturing and logistics support
d.
Symbiotic relationship allows US firms to concentrate on knowledge-intensive activities while providing Asian
companies with access to global markets
11.
Nature of computing as the
focal point of intelligence shifted from the individual computer to the network
a.
The Internet has bought about long-expected convergence of computing and communications, expanding the competitive arena beyond the boundaries of the
computer industry
b.
Presents new and
unpredictable challenges for both companies and countries
c.
Companies more flexible than
ever
and must form alliances in order to establish
and capitalize on new standards of platforms
d.
Production to use and promote
competition in the telecommunications sector if they exploit new opportunities in the network era
12.
US companies compete to establish key Internet standards and define
new network-based markets
a.
Enjoy the rewards of
increasing returns businesses, but others will face
tough competition in decreasing returns markets
b.
Low-cost information
appliances compete with the PCs in the end user leading
to even tighter margins in hardware
c.
Focusing on design and
marketing and tapping the Asian production network for manufacturing
13.
Asian companies enjoy a boom in hardware
opportunities, will struggle to sustain profits
a.
Find new opportunities in software and services that target local languages and cultures
b.
Chinese language market has
great potential and chance to define a large and
dynamic market
c.
But to move beyond decreasing
returns businesses, Asian countries and companies
require a change of perspective in order to value software, services and
computer use as much as they now value
hardware production
VII. Conclusion
1.
Make tentative conclusion regarding changing patterns of
international competitiveness
a.
In 20th century, US enjoyed and
unprecedented position as the world’s leader in industrial production
b.
In 19th century, the origins based
on an abundance of raw materials and large internal market
c.
Raw materials and high levels
of craft knowledge made the US
an industrial leader in material-based industries
d.
American’s leadership in
mass-production industries was followed by a similar lend in high-technology industries after World War II
e.
The erosion in mass produced
goods was largely a result of the internationalization of markets
f.
The historical basis for US mineral
abundance was much more a matter of early development rather than geological
endowment
2.
US decline in
high-technology industries can be traced to several factors:
a.
Technology became more
generally available with the internationalization of markets to all those with
the required skills and willingness to make the investment
b.
Others industrial powers
greatly increased their expenditures on R&D. By
early 1980s, several countries had surpassed the US in the percentage of GNP
spent on civilian R&D
c.
The convergence in high
technology industries saw a sharp decline in the importance of spillovers from
military R&D to civilian technology. Spillovers
provided significant advantages in the 1950s, today they are of very little
value
3.
The basis of competitiveness
appears to be shifting within advanced economies
a.
A period of economic
restructuring with a force on ways to reduce costs and increase efficiency
b.
Emphasis on innovation as a
basis for sustained competitive advantage
4.
Clusters
a.
Invest heavily in human
capital will dominate high-technology manufacturing and international trade
b.
Strong science and technology
is crucial to maintaining a competitive economic base
c.
The centre of any effective science and technology policy is
an educated workforce and a productive R&D enterprise
d.
Regional science and
technology policies have promote territorial completive
advantages that the strategic for innovation
by local firms
e.
The strategic resource is a
collective capability for continuously innovating the level of excellence
required by international standards
f.
Implies cooperation between
productive capabilities and scientific know-how
Locally developed within specialized institutions
