AT 6001 Fundamentals of Management of

Technology
Lecture 5
Competitiveness

Dr. Manzila Islam Tuheen

Assistant Professor
Institute of Appropriate Technology (IAT)
Bangladesh University of Engineering and Technology (BUET)
 7 Competitiveness

Learning objectives
❑ Definition – Competitiveness
❑ Indicators of Competitiveness
❑ Macro and Micro level Competitiveness
❑ Concluding remarks
 7.1 Competitiveness – Definition and Indicator

❑ "Competitiveness" is one of the terms that has emerged strongly in the new era of globalization. In the last
decade it became a key word used to describe the economic strength of countries or the position of a
certain company with respect to its competitors in the marketplace.
❑ Competitiveness is the process by which one entity strives to outperform another. Whether the entity is a
person, a corporation, or a country, the goal is to win.
❑ To be competitive, several factors must exist: ability, the desire to win, commitment or perseverance, and
the availability of certain resources.
❑ For a company, being competitive means producing or providing, in a timely and cost-effective manner, a
product or a service that meets the test of the marketplace and the needs of customers. To maintain its
competitive position, the company must continue to outperform its business rivals.
❑ In today's global markets, those rivals may be operating within local, regional, national, or global markets.
 7.1 Competitiveness – Definition and Indicator (Cont.)

❑ At the macro level, the competitiveness of nations reflects the standard of living of their citizens. National
competitiveness is a consolidation of the micro-level performances of companies and individuals.
❑ Issues of competitiveness have gained prominence in the post-cold war era. The fall of communism, the
trend toward democracy, the opening of the market in the eastern bloc, and reduced military spending
have created a new environment for business. Countries’ objectives have converged on creating
sustainable economic growth.
❑ In 1985, the U.S. President's Commission on Industrial Competitiveness (Council on Competitiveness,
1994) defined competitiveness as “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”.
 7.1 Competitiveness – Definition and Indicator (Cont.)
The Washington-based U.S. Council on Competitiveness adopted this definition and depicted the determining
factors of competitiveness as a four-section pyramid, shown in Figure 7-1.

Investment
❑ No economy can operate successfully without proper investment.
❑ The creation of wealth requires a productive base as the foundation of
economic growth. Investments in technology, factories, equipment,
infrastructure, and people help create such a foundation.

Productivity
❑ High levels of productivity provide an organization with a distinct
advantage over its rivals.
❑ Productivity helps drive cost down and improve profitability.
❑ Efforts to improve productivity should not, however, sacrifice
quality.
❑ Gone is the time when quality was considered a luxury; today, it is
a minimum requirement- an essential factor.
❑ Product quality and performance are determinants of overall
competitiveness.
 7.1 Competitiveness – Definition and Indicator (Cont.)
Trade
❑ Trade connects production with markets. Today's trade is global.
❑ Trade operations have become more complex with the creation of trade blocs such as the European Union (
EU), the North American Free Trade Agreement (NAFTA), the Asia Pacific Economic Cooperation (APEC), and
the Association of Southeastern Asian Nations known as the "ASEAN."
❑ An in-depth study of the world trend on trade and competition is needed to fully appreciate the effect of the
trade factor on competitiveness.
❑ Products or services that cannot be traded in open markets do not produce the economic growth that can
trigger a significant improvement in standard of living.

Standard of Living
❑ Gross domestic product (GDP) and gross national product (GNP) are
economic measures of the amount of wealth created in a country.
❑ This wealth is passed to the citizens and reflected in their standard of
living. It is possible to determine a country's competitiveness based
on its citizens' standard of living as defined by GDP per person.
❑ A nation's technological advancement is a major contributor to its
economic prowess.
 7.2 Competitiveness – Indicator
Investment Indexes
Investment in R&D, plant and equipment (P&E), and education provides a base for long term economic growth.
Therefore, it is very important to track these indicators. Figure 7-11 presents the G-7 countries' trends of
investment in civilian R&D as a percentage of their GDPs from 1982 to 1992. As the figure shows, Japan and
Germany invested significantly higher percentages of their GDPs in civilian R&D than did the United States. This
factor contributed to their success in commercializing civilian products in the 1980s and early 1990s. The U.S.
and Japanese ratios of GNP devoted to nondefense R&D are compared in Figure 7-13. There should be no real
surprise that Japan did well during the 1980s in innovating products for the commercial market.
 7.2 Competitiveness – Indicator (Cont)
Productivity Indexes
Productivity is the ratio of output to input. It reflects the efficiency of an operation. Several indexes can be used
to express and track productivity (Sumanth,1984). The most common index used to track productivity in
manufacturing is output per worker-hour input, shown in Figure 7-8. It should be noted that in spite of the
relative productivity gains achieved by most
G-7 countries over the United States during the past two decades, the United States still has the highest
national productivity index. However, as shown in Figure 7-10, the gap between the United States and several G-
7 countries has narrowed significantly since the early 1980s.
 7.2 Competitiveness – Indicator (Cont.)
Trade Indexes
A trade balance represents the difference between the total value of merchandise goods and services exported
by a country and the total value of merchandise goods and services imported. The trade deficit is an index of
the relative competitiveness of a country's industry and service organizations.
Figure 7-7 shows yen/dollar exchange rates for the years 1985 to 1995. As the value of U.S. currency declines, it
becomes more expensive for Americans to buy imported products. It also becomes less expensive for people
overseas to buy U.S. products, thus increasing U.S. exports.
 7.2 Competitiveness – Indicator (Cont.)
Standard-of-Living Indexes

Standard of living reflects how well people live in a certain country or region of the world. It reflects the
distribution of a country's wealth among its citizens. The Council on Competitiveness defines standard of
living as gross domestic product per person. This index of standard of living assumes that the country’s
wealth is distributed evenly among the inhabitants regardless of social or political differences.
 7.3 MOT and Global Competitiveness
Management of technology plays a major role in creating and maintaining competitiveness in the global arena.
MOT activities may be undertaken at the national/international, or macro level, or at the firm, or micro, level. At the
macro level, countries must be able to:

❑ Create an economic growth policy, taking into consideration the fact that technology policy is a
major contributor to economic strength.
❑ Provide an infrastructure permitting the support of technological enterprises and the facilitation of
commerce and trade. Planning for human resource development must also be an integral part of
any technology development strategy.
❑ Encourage cooperation between government, industry, and education and research institutions.
❑ Energize and support technological innovation and develop plans to enhance creativity and support
R&D activity.
❑ Promulgate necessary but unburdensome legislation and regulation measures to protect the
environment and strengthen social structure.

✓ In the past, national competitive advantage focused on the availability and successful exploitation of raw
materials, labor, transportation, and sources of capital.
✓ However, in today's global economy, multinational corporations have crossed national boundaries to
establish their facilities where production cost is lowest.
 7.4 Competitiveness – The Game of Nations
❑ Nations of the world are engaged in an economic game. They compete for resources and for the means to
harness their resources into production endeavors.
❑ Figure 7-23 lists the relative rankings of nations based on an index of competitiveness used by the
International Institute for Management Development (IMD) in Switzerland. As can be seen, countries can lose
or gain in rank every year.

❑ Several of the Tigers of Southeast Asia,

including Hong Kong, Korea, Thailand, Malaysia,
and Indonesia, suffered a strong setback in their
economic systems in 1997. Their national debts
mounted, stock markets plummeted, and
several of their financial institutions went
through bankruptcies.
❑ The tigers seem to have fallen into this crisis
because of a combination of managerial
problems and a changing technological
landscape.
 7.4 Competitiveness – The Game of Nations (Cont.)
❑ In the meantime, China, a rising star on the competitiveness scale, is outperforming Thailand, Indonesia,
and Malaysia. China can produce many products cheaper than its neighbors can.
❑ China’s wage structure gives them a competitive advantage at the low-technology end. China’s cheap labor
and cheap currency enables China to undersell its neighbors. China's low wage structure, however, does
not pose the same level of threat to the United States and other countries specializing in high-technology
products

The following are some MOT guidelines for improving and sustaining a nation’s competitive position in the
global arena:
❑ A nation must first have a stable political system that permits economic growth.
❑ Develop strong financial institutions capable of supporting sustained technical progress.
❑ Strengthen educational and training systems that permit citizens to move up the knowledge ladder.
❑ Support R&D activities.
❑ Encourage creativity and entrepreneurship.
❑ Predict the social and environmental consequences of technology and develop appropriate public
policies to deal with them.
❑ Develop strategic alliances with compatible countries to enhance technological progress and
strengthen trade partnerships.
 7.5 Competitiveness of Firms – The Micro Level
National competitiveness is largely dependent on the competitiveness of firms within the nation's boundaries. A
company's competitiveness is dependent on its ability to provide goods and services to the marketplace more
efficiently than others involved in its arena.
This depends on the company's ability to exploit ideas and resources in a timely, cost-effective manner in order to
accomplish desired goals and objectives and to create products or services for its customers that meet or exceed
their demands and satisfaction.

To become or to remain competitive firms must be able to:

❑ Develop a culture in which the value of technology as a strategic competitive weapon is fully
appreciated.
❑ Understand the dynamics of the process of technological innovation.
❑ Monitor and forecast technological changes.
❑ Develop and adopt effective methodologies to measure the impact of new technologies on their
business.
❑ Facilitate the implementation of new technologies in their operations
❑ Prepare, train, and hire the proper workforce to implement the new technology.
❑ Develop an organizational structure that permits effective and efficient implementation of
technological changes.
❑ Develop an appropriate reward system for employees and managers.
 7.5 Competitiveness of Firms – The Micro Level (Cont.)
At the firm level, management must develop a strategy for competing. The question frequently asked is, On what
basis can a firm compete? The answer follows the most fundamental principle in business: Competitiveness
can be achieved by providing value to the customer. Firms can compete in the marketplace using many
formulas. Some of these are listed below.

❑ Offer products or services desired by a customer. ❑ Improve efficiency.

❑ Rely on innovation to introduce new products or ❑ Improve customer service.
services. ❑ Promote creativity and entrepreneurial spirit.
❑ Achieve technological superiority in (a) products, ❑ Develop and harness employee knowledge and
(b) process, (c) service, and (d) marketing. talents.
❑ Concentrate on quality of product or service. ❑ Follow a progressive culture for the
❑ Reduce cost and/or price. organization.
❑ Be first to market. ❑ Encourage teamwork.
❑ Reduce the product development cycle's time from ❑ Introduce a progressive management style.
concept to market. ❑ Enhance the ability to forecast.
❑ Create and target niche markets for products. ❑ Sharpen the ability to plan.
❑ Eliminate waste. ❑ Focus on increasing market share.
❑ Build in flexibility to change.
 7.5 Competitiveness of Firms – The Micro Level (Cont.)
Competitive firms can be recognized by a set of characteristics. A successful firm usually has one or more of
the following attributes:

❑ Profitable. ❑ Fair.
❑ Stable. ❑ Knowledgeable about its core technology.
❑ Capable of leading in innovation and technology. ❑ Knowledgeable about its strengths and
❑ Has ability to maintain or increase market share. weaknesses.
❑ Capable of developing and introducing innovation in ❑ Knowledgeable about its competitors.
a timely manner. ❑ Has visionary leaders.
❑ Is a pacesetter, often setting industry standards. ❑ Knows how to fully utilize the capability of its
❑ Has an ability to utilize technology and to capture employees.
market share through products, process, ❑ Motivates and rewards employees
information systems, or service innovation. appropriately.
❑ Has the ability to match its strengths with targeted ❑ Knowledgeable about the technology and
market needs better than other companies can. business life cycles and knows when to hold
❑ Aggressive in its desire to reach planned goals. and when to fold new projects.
❑ Flexible. ❑ Knowledgeable about its social, political, and
❑ Progressive. legal environment.
 7.6 Competitiveness - Conclusion
❑ Competitiveness is dependent on how well people manage the system of wealth creation.
❑ At the macro level of nations, public policy will determine how well coordinated the economic and
financial system is with the technological and production system and the trade practices of a country.
❑ At the micro level of the firm, competitiveness will depend on how well organizations manage their
technological resources. Keeping up with changes in product, production, and marketing technology
enhances any firm's opportunities of success.
❑ Policies and strategies followed by firms at the micro level influence the economic conditions at the
national level. At the same time, public policy regarding investment policies, interest rates, tax
incentives, education, and trade policies affects industry and businesses.
❑ It is therefore essential that policies at both the national and the firm levels be well integrated and
harmonized.
❑ Governments and businesses should simultaneously focus on creating and sustaining production
systems capable of competing in a global environment.