Competitiveness For Competitiveness For EntrepreneurEntrepreneur

Boston Industrial Model

The The EEmergence omergence of New Economyf New Economy

• Mass manufacturing Competition is Over

• Value of intangible assets

• Soft infrastructure critical

• Focus on activities not industries

CCreative reative EEconomy conomy Demand Knowledge, InnovationDemand Knowledge, Innovation

What is Competitiveness?

Political/Legal

Industry Environment

Demographic Economic

Technological

Global

CompetitiveEnvironment

Sociocultural

Components Of The Macro EnvironmentComponents Of The Macro Environment

Determinants of Productivity and Productivity Growth

Integration of Macro- and Microeconomic Reforms

Productivity and the Microeconomic Business Environment

What is Competitiveness?• Competitiveness is determined by the productivity with w

hich a nation uses its human, capital, and natural resources. Productivity sets a nation’s or region’s standard of living (wages, returns to capital, returns to natural resource endowments)– Productivity depends both on the value of products and services (e

.g. uniqueness, quality) as well as the efficiency with which they are produced

– It is not what industries a nation competes in that matters for prosperity, but how firms compete in those industries

– Productivity in a nation is a reflection of what both domestic and foreign firms choose to do in that location. The location of ownership is secondary for national prosperity

– The productivity of “local” industries is of fundamental importance to competitiveness, not just that of traded industries

– Devaluation does not make a country more competitive

Michael E. Porter

Competitiveness Is NOT…

• Abundant Natural Resources

• Cheap Labor

• Cheaper Currency

• Better Government “Incentives”

What is competitiveness ?

New Paradigm of Globalization New Paradigm of Globalization CompetitionCompetition

Source: Porter Competitiveness

Firm Strategy, Industry Structure

Related and Supporting

Industry

Market Demand

Global Floor

“ISO” Ceiling

Low Cost,Low Value

Trap

Labor Intensive

Labor Intensive

Vertical/SpecificIndustry

Vertical/SpecificIndustry

Labor Intensive

Labor Intensive

Supply

Collaboration Concepts

Competitiveness Is…

Intersection of Public Policy and Commercial Strategy

Strategy BEFORE Policy

PRIVATE

RESTRUCTURERESTRUCTURE

REPOSITIONREPOSITION

PUBLIC

Competitiveness Is…

Pursuing Effective Dialogue

• Individual Company• Ad-hoc Complaints• Operational Level• Laundry Lists• Anecdotal Evidence• Concessions• Opposite Sides

• Industry Clusters• Comprehensive Vision• Strategy • Priorities• Data and Analysis• Co-Responsibility• Same Side of Table

INEFFECTIVEINEFFECTIVE EFFECTIVEEFFECTIVE

Competitiveness Is…

Competitiveness Measurement

Competitiveness Evaluation

Competitiveness Cube

Understanding Competitiveness

Competitiveness MeasurementCompetitiveness Measurement

Competitiveness IndexesCompetitiveness Indexes

Competitiveness Ranking

Stages of Competitiveness Development

Competitiveness Theories

Threat of New Entry

Rivalry Among Existing Competitors

Bargaining Powerof Customers

Threat of Substitutes

Bargaining Powerof Suppliers

• Economies of scale• Proprietary product

differences• Brand identity• Switching costs

• Capital requirements• Access to distribution• Absolute cost advantages• Government policy• Expected retaliation

• Relative price performance of substitutes• Switching costs• Buyer propensity to substitute

• Industry growth• Fixed costs / value

added• Overcapacity• Product differences• Brand identity

• Switching costs• Concentration and balance• Informational complexity• Diversity of competitors• Corporate stakes• Exit barriers

• Differentiation of inputs• Switching costs• Presence of substitute

inputs• Supplier concentration• Importance of volume to

supplier• Cost relative to total

purchases• Impact of inputs on cost or

differentiation• Threat of forward

integration

• Buyer concentration• Buyer volume• Buyer switching costs• Buyer information• Ability to integrate

backward• Substitute products• Price / total purchases• Product differences• Brand identity• Impact of quality /

performance• Buyer profits

Porter’s Five ForcesPorter’s Five Forces

Source: Michael E. Porter, Competitive Advantage (New York: Free Press, 1985)

The Five Competitive ForcesThe Five Competitive Forces

Force Entry

Rivalry

Substitutes

Buyers

Suppliers

Erecting barriers (isolating mechanisms) create exploit economies of scale, aggressive deterrence, design in switching costs, etc.

Compete on nonprice dimensions: cost leadership, differentiation, cooperation, etc.

Improve attractiveness compared to substitutes: better service, more features, etc..

Reduce buyer uniqueness: forward integrate, differentiate product, new customers, etc..

Reduce supplier uniqueness: backward integrate, obtain minority position, second source, etc..

Porter’s Diamond ModelPorter’s Diamond Model

Diamond Model

Cluster

Customers

Firm

Suppliers

Competitors Complementors

A player is your complementor with respect to customers if customers value your product more when they have the other player’s product as well

A player is your competitor with respect to customers if customers value your product less when they have the other player’s product as well

A player is your complementor with respect to suppliers if it is more attractive for a supplier to provide resources to you when it is also supplying the other player

A player is your competitor with respect to suppliers if it is less attractive for a supplier to provide resources to you when it is also supplying the other player

Coopetition and theCoopetition and the Value NetValue Net

Source: Adam Brandenburger and Barry Nalebuff, Co-operation (New York: Currency Doubleday, 1996)

CLUSTER MAPS

Target Markets

Target MarketsSupporting

Industries

SupportingIndustries

Cluster DriverCluster Driver

Cluster FacilitatorCluster Facilitator

Core Cluster

The Collaborative The Collaborative Competitiveness DevelopmentCompetitiveness Development

Competitiveness Directions

The Eight Questions• How wired is your country?• How fast is your country?• Is your country harvesting it’s knowledge?• How much does your country weigh?• Does your country dare to be open?• How good is your country at making friends?• Does your country’s management get it?• How good is your country’s brand?

Friedman’s “Eight Habits of Highly Effective Countries”

• Is R&D Advantage?

• “high tech”industries Advantage?

• Cheap Labor?

• Abundance Resources?

Questions For New Business?

• Entreprenue is – Innovation– Strategic Management System Thinking– Collaboration– Financial tools– Commercialization, etc.

Directions

Enright’s Meso Model

Enright’s Market FailuresEnright’s Market Failures

• Impacted Information

• Managerial Myopia

• Under-provision of public goods

• Coordinate Failure

Innovation AccessInnovation Access

Extreme SpecializationExtreme Specialization

Information SpilloversInformation Spillovers

Faster Innovation AdoptersFaster Innovation Adopters

Easy Access to

Resources

Easy Access to

ResourcesFlexibility and

Rapid Response

Flexibility and

Rapid Response

Limitated FacilitatesLimitated Facilitates

The Sources Advantage of the Firms

ActivitiesActivities ResourcesResources

KnowledgeKnowledge

Enright 2002

Leap Frog(Innovation Driven)

• PProductroduct Innovation Innovation• PProcesrocess Innovations Innovation• Business Model InnovationBusiness Model Innovation• Breakthrough InnovationBreakthrough Innovation

ClustersClusters

Cluster ConceptsCluster Concepts

Cluster ISCluster IS

• “A cluster is a geographically proximate group of companies and associated institutions in a particular field, linked by commonalities and complementarities.“

Michael E. Porter.

Cluster ValuesCluster Values

• Competitive strategy is about being different.

• It deliberately chooses a different set of activities to deliver a unique mix of value

Michael E. Porter.

And, cluster is not just an And, cluster is not just an alliancealliance

Examples: CExamples: Ceramic eramic TTile ile CCompanies ompanies and and SSuppliers in uppliers in 30 KM.30 KM. RRadiusadius

Cluster StrategyCluster Strategy

• Organic Cluster Strategies

• Transplant Cluster Strategies

• Hybrid Strategies

Cluster RequirementsCluster Requirements

• A direct dialog with the cluster firms to better understanding of the industry needs.

• Create awareness of existing support programs to firms and associations in the industry.

• Designing tailor made support for the industry.• Involving private sector in their financing and ma

nagement.• Coordination within different Government depart

ments to support the industry.

FFoster oster CCluster luster DDevelopmentevelopment

STATISTICAL OBSERVATION

INDUSTRY STUDIES

FIRMS FORAE(Dialog)

CHANGE MANAGEMENT+

-

Italy ClustersItaly Clusters

USA ClustersUSA Clusters

Cluster MapsCluster Maps

Clusters must be evoluing by private and public influrencing actions

Organization NetworkOrganization Network

Business Improvement For SME

Clustering

• Scottish Enterprise Model

• Dulch’s 9 Steps

• Cluster Initiative Performance Model (CIPM)

New Strategy

Working GroupMeetings

Organize ClusterWorking Groups

ActionGroup:Define Vision,Key Themes

Working Group Co-ChairsParticipants

Working Group Co-ChairsParticipants

Initiative Team

Initiative Team

Initiative Team

Initiative Team

Initiative Team

Initiative Team

Cross-CuttingInitiative Teams

Broad Vision, Strategy, Initiatives

Key Themes

New Business Propositions and Enabling Actions for Each Theme

Scottish Enterprise Methods

Mobilise Diagnose Collaborate Implement

Scottish Tourism

• One to three hours from our main markets which are the central belt of Scotland and the North of England

• 6pm in the city by 8pm relaxing in the Scottish Borders

• Quiet Roads in the Scottish Borders

Duch’s 9 Step

Methods

ObjectivesObjectives

Impacting the leaders will initiate the change

Methodology

Cluster Drive

Survival

Cluster Motivation

CIPM Model

Cluster Lifecycle

Cluster Actors

Objective Checklist

Target Area of Activity